TWO men fooled the public into investing in a fraudulent forex company, the Crown alleged in the territory's first prosecution of its kind in the District Court yesterday. On trial before Judge Chua are former investment consultant Lee Chi-ching, 43, and electrician Yung Sha-ping, 32, who are jointly charged with false accounting and conspiracy to defraud. They each face a count of fraudulently or recklessly inducing people to invest money. Lee also faces a count of false accounting. They denied all charges. Prosecuting counsel Mr Rodney Griffith said in his opening: ''As far as I am aware, this trial is the first prosecution in Hongkong, in a court above the level of the magistracy, of defendants in connection with a fraudulent 'forex' company.'' He said the defendants established a gold and forex trading company called Master Victory Investment Limited (M-VIL) in March 1990. On March 21, 1990, they were appointed directors of M-VIL, which traded at the United Centre in Queensway. Less than a year later, the company had folded, with net losses, according to its management reports, of $17.648 million. The Crown claims that, between March 1990 and February 1991, the defendants conspired to defraud the public by dishonestly inducing them to become investors in M-VIL. The prosecution accused the defendants of having falsely represented that the authorised share capital of M-VIL was increased from $10,000 to $20 million and was fully paid up. The Crown said they borrowed part of the sum to make up the paid-up capital. The prosecution argued that a loan could not be paid-up capital but the defence contended otherwise. They showed prospective customers copies of a ''Return of Allotments to the Registrar of Companies''. The Crown said the document was tantamount to certifying to laymen that they had a paid-up capital of $20 million. In fact, M-VIL had no capital apart from loans and initial margin deposits. The defendants lured the public to invest with them on the forex markets by assuming an aura that the company was financially sound, the court was told. ''There was also a coloured and glossy introductory brochure to M-VIL which, in flowery language and with hyperbole, painted in bright lights the splendid achievements and abilities of M-VIL,'' Mr Griffith said. In addition, he said, prospective investors were shown a copy of the prestigious Certificate of Membership of the Chinese Gold and Silver Exchange. During the nine months' operation, from May 1, 1990 and January 31, 1991, the company accepted a total of $28.028 million margin deposits from its clients. Mr Griffith will continue his opening today. Lee and Yung are represented by Mr Tsang Kam-hung and Mr Jason Pow respectively.
