Enigma Network

China Green suspends trading after being sued by Convoy as ‘Enigma Network’ fallout continues

Intrigue grows over the goings-on at 50 listed Hong Kong businesses with cross holdings in each other

PUBLISHED : Wednesday, 20 December, 2017, 12:46pm
UPDATED : Wednesday, 20 December, 2017, 10:36pm

China Green Holdings, named by stock commentator and activist investor David Webb in the so-called “Enigma Network” of 50 penny stocks trading in Hong Kong, suspended trading on Wednesday after the company was sued by Convoy Global Holdings in a legal action against 28 defendants for causing it substantial financial losses.

Webb issued the report on the network in May, identifying 50 listed businesses that he said had cross holdings in each other, including Convoy, and had approved loans and transactions, which did not make any commercial sense.

Many of the Enigma stocks crashed on June 27 abruptly, by between 20 per cent and 90 per cent. Convoy Global Holdings’ shares have been suspended since December 7.

China Green is named as one of the 28 defendants in a writ of summons filed by Convoy on Tuesday in Hong Kong’s High Court.

“The company (China Green) is currently seeking legal advice on the matter to assess the merits and implications (if any),” China Green said in a statement on Wednesday.

Suspension of its shares on Wednesday is pursuant to the rules and provisions of the stock exchange and the SFC.

Convoy sues ex-directors for stealing from financial adviser’s US$520m stock placement

Further announcements will be made to update on the progress of the matter “as and when appropriate”, the company added.

“Shareholders of the company and potential investors should accordingly exercise

caution when dealing in the shares of the company.”

Convoy said in the writ on Tuesday it was seeking unspecific damages from 28 defendants, alleging they were involved in gross breaches of fiduciary duties and illegitimate diversions of the company’s funds, causing it “substantial loss and damage”.

One hundred and thirty-six officers from the city’s Securities and Futures Commission searched multiple premises as part of an investigation into the Enigma Network, Bloomberg reported in October.

The defendants named in the writ include former Convoy chairman Quincy Wong Lee-man, former Convoy director Roy Cho Kwai-chee, known to local stockbrokers as “Doctor Cho”, Lerado Financial Group chairman Mark Mak Kwong-yiu, as well as officials from Kaisa Group, China Green and companies owned by listed Junyang Financial Holdings and Hong Kong Education (International) Investment.

Earlier this month, three of Convoy’s executive directors were arrested by Hong Kong’s anti-graft body the Independent Commission Against Corruption, after which Convoy suspended its duties and named them in the writ as defendants.