Former CLSA trader Raymond Ng, once dubbed the "King of Warrants" has been sentenced to four years in jail for his part in masterminding a scam that manipulated the warrants market, earning him more than HK$100 million through bribery and collusion.

Ng's wife, 40-year-old Cheung Yuen-yi, was sentenced to three years for helping launder the proceeds.

Ng, the 41-year-old operator of the Hong Kong Investor Company, was found guilty of four counts of conspiracy to defraud and one count of committing an act with intent to pervert the course of public justice.

Cheung was found guilty of 17 counts of dealing with property known or believed to represent the proceeds of an indictable offense.

The couple have three young boys who will be sent to live with their grandparents in England.

"Not to be unsympathetic, but she should have thought about this day every time she deposited the money into the safety deposit box and every time she dealt with cash deposits in her account and distributed the money to her sons", District Judge Douglas Yau Tak-hong said Wednesday in sentencing Cheung.

Independent Commission Against Corruption officers found HK$68.9 million stashed in safes and bank accounts under Cheung's name while another HK$34.64 million was found in her Bank of China safety deposit box.

The court heard Ng was the ring leader of the scam which involved offices in Hong Kong and the mainland and ran for roughly two years.

The scam was hatched by Ng and Cheung Ching-ho who was granted immunity in exchange for his testimony.

Ng concocted the plan which involved placing insiders in companies authorized to sell derivative warrants, and setting up a Hong Kong office and a mainland office to handle the trades in a bid to evade Hong Kong law-enforcement agencies.

Cheung recruited six other participants who also escaped charges in exchange for their cooperation with authorities.

Ng handed out more than HK$2 million in bribes over the two-year period to pay off insiders who helped him manipulate the market through five participants in a Shenzhen office.

Insiders at the warrant issuing firms quoted favorable bid and ask prices which then were relayed to Ng's underlings, who placed orders through dummy accounts to create the impression of active trading. The active trades, which led to no change in ownership of the warrants, drew genuine investors.

The style of trades meant the warrant's prices generally went up. Falls were cushioned. Prosecutor Joseph Tse characterized the trades as price manipulation.

Once a month, profits from the dummy accounts were skimmed and stored in various bank accounts, safes and safety deposit boxes under Ng's wife's name.

The bulk of the loot amassed by Ng was taken from liquidity providers such as CLSA, Standard Securities, Citigroup Global Markets and Tai Fook Securities which underwrote the warrants.

Co-defendant 29-year-old Leo Lam Sze-hang was sentenced to two years and four months and 35-year-old Polly Sun Chor-fun to two years on charges of conspiracy to defraud. The pair played lesser roles in the scam, Judge Yau said.

China Daily

(HK Edition 04/29/2010 page1)