SINGAPORE: Two company directors accused of cheating more than 2,000 investors in a fraudulent foreign exchange trading pyramid scheme from 2014 to 2015 went on trial at the State Courts on Monday (Mar 28).
Malaysians Leong Koon Wah and Ng Kuan Chuan face a total of eight charges under the Companies Act, Securities and Futures Act and Multi-Level Marketing and Pyramid Selling (Prohibition) Act.
Leong, 49, was the managing director of local company Singliworld from December 2012. He was also a director of overseas-incorporated Triumph Global and Union Markets, which purported to be forex trading brokerages.
Ng, 35, was a director of Triumph Global and involved in the management of Union Markets.
Singliworld started soliciting customers to invest in a “Singliforex” scheme sometime in early 2014, said Deputy Public Prosecutors Nicholas Tan and Michelle Tay.
Singliforex claimed to generate trading returns as high as 13 per cent a month and conservative returns as low as 2 per cent a month, allowing it to appear “both attractive and realistic at the same time”, said the prosecution.
Prospective customers were required to open an account with a forex brokerage specified by Singliworld. The designated company was Triumph Global from March 2014 to April 2015, and Union Markets from May 2015 onwards.
Investors were required to fund their account but not allowed to conduct any of their own trades. Instead, they were told that professional traders would conduct forex trading on their behalf.
By May 2015, Singliworld’s liabilities had exceeded US$17 million (S$23 million).
“In reality, there were no such genuine traders, no such genuine trading, and no such genuine trading returns,” said the prosecution.
“Investors were sent daily statements falsely purporting to show that the trades therein had genuinely taken place.”
HOW THE SCHEME WORKED
Investors were purportedly entitled to 70 per cent of the net profit made from their forex trading account, with the other 30 per cent supposedly going to the professional traders.
They were told that they would be charged a commission of US$40 per “standard lot” of foreign currency traded, with 0.24 standard lots being the typical daily trade volume for an investor who had put in US$1,000.
In fact, Triumph Global and Union Markets were not connected to a single liquidity provider to trade foreign currency, and did not hold any capital markets licence to carry out leveraged foreign exchange trading, argued the prosecution.
Singliforex allegedly also operated as a pyramid scheme, with investors being told they could make money by getting others to invest in the scheme.
The scheme purportedly offered “rebates” to investors for trading activities of people they recruited into the scheme. Investors became “sponsors” or “uplines” for those they recruited, who were known as their “downlines”.
Sponsors could earn “network rebates” of up to US$3 per standard lot traded in a downline’s account, up to five levels of downlines.
They could also earn “leadership rebates” of up to US$4 per standard lot traded in their own account and the accounts of all their downlines.
This allowed the scheme to grow exponentially from an initial handful of investors, with Leong and Ng together responsible for its “success”, said the prosecution.
Leong allegedly ran Singliworld’s marketing operations and solicited investors to join the scheme. Ng was allegedly responsible for managing the staff of Triumph Global and operating the software purportedly used to trade in the investors’ accounts.
The trial continues. The prosecution is expected to lead evidence from Singliworld’s office and Leong’s electronic sources, among others.