Tiger Asia must pay investors back HK$45 m
HK court orders US hedge fund to refund investors on other side of insider trades it made on mainland banks in 2008 and 2009
A Hong Kong court yesterday ordered US hedge fund Tiger Asia Management and two senior executives to pay more than HK$45 million to about 1,800 investors for insider dealing of shares in two Hong Kong-listed mainland banks in 2008 and 2009.
The Court of First Instance gave the verdict after Tiger Asia, its founder Bill Hwang Sung-kook and head of trading Raymond Park admitted to insider dealing and market manipulation, as alleged by the Securities and Futures Commission (SFC).
They have to pay HK$45.27 million, roughly the sum they earned from the illegal trades, to administrators John Lees and Kok Wing-chong of JLA Asia, which will arrange the refund to investors who traded against the fund in those deals.
But Tiger Asia's legal battle with the SFC is not yet over. The Market Misconduct Tribunal will have a three-day hearing from May 7.
The SFC said Tiger Asia had already admitted to insider dealing and manipulation to the tribunal, so the hearing would be to determine the penalties to be imposed on the firm and the executives.
It will also ask the tribunal to issue a "cease and desist order" to ban Tiger Asia, Hwang and Park from dealing in Hong Kong for up to five years.
Tiger Asia's statement said the company and the two executives "agreed and admitted facts" filed in the court that they "contravened Hong Kong's laws prohibiting insider dealing when dealing in the shares of Bank of China Limited (BOC) and of China Construction Bank Corporation (CCB) in December 2008 and January 2009 and manipulated the price of CCB shares in January 2009".
The SFC started its legal action in 2009 against Tiger Asia, Hwang, Park and trader William Tomita, for insider trading and market manipulation in 2008 and 2009 before separate share-placement announcements by BOC and CCB.
In both cases, the bankers arranging the placement invited Tiger Asia to buy the shares, giving the fund advance knowledge. Tiger Asia sold the shares short before the announcements, and bought them back at a lower price after the deals were made public.
Tiger Asia had opposed the SFC action, and their legal battle dragged on for years until May this year when the Court of Final Appeal confirmed the SFC had the right to sue for investors to seek compensation. Then in July the SFC put the case to the Market Misconduct Tribunal.
The SFC has decided not to take action against Tomita because he was only a junior staff member executing the trades.
"Tiger Asia's admission of insider dealing and manipulation vindicates the SFC's allegations made at the outset," said Mark Steward, executive director of the SFC.
New York-based Tiger Asia was founded by Hwang in 2001 with a focus on trading equities in mainland China, Japan and Korea. It trades in Hong Kong but has no office here.
Yesterday's payback order was made according to Section 213 of the Securities and Futures Ordinance.
This is the second time in a month that insider dealers have had to pay investors back.
The court last week ordered the city's biggest convicted insider trader, Du Jun, to pay 297 investors almost HK$24 million to compensate for what he earned from illegal dealings in 2007.