Court Orders Boiler Room Fraudsters to Compensate Investors

sfcThe Court of First Instance has granted orders sought by the Securities and Futures Commission (SFC) against boiler room fraudsters to compensate investors who fell victim to the scams following legal proceedings under section 213 of the Securities and Futures Ordinance (SFO) (Note 1).

The SFC told the Court that three unlicensed entities, which purported to be based in and operated from Hong Kong, solicited investors through emails and cold calls to open trading accounts and to invest in securities and futures products via their websites at various times in 2014.

The three entities involved in the boiler room scams are:

  • Cardell Limited and/or Cardell Company Limited (Cardell) using the website
  • Waldmann Asset Management (Waldmann) using the website and/or
  • Doyle Hutton Associates (Doyle) using the website and/or

It emerged that none of the trades in securities and futures agreed with the affected investors were ever executed on any recognised exchange, nor have these investors been able to recover any of their monies.

The affected investors were also asked to deposit funds for their investments into various Hong Kong bank accounts held by the following companies:

  • Cedan Limited (Cedan)
  • Hamtron Limited (Hamtron)
  • Cardan Limited (Cardan)
  • Mutual Hope Limited (Mutual Hope)

To protect the monies in bank accounts held by Cedan, Hamtron, Cardan and Mutual Hope which apparently were the proceeds of the unlicensed and boiler room activities carried out by Cardell, Waldmann and Doyle, the SFC had obtained interim injunctions to freeze the monies in these four bank accounts in January 2016 (Note 2).

The Court has found Cardell, Waldmann and Doyle in contravention of sections 109 and 114 of the SFO as they held themselves out as being prepared to carry on regulated activities in securities and futures contracts advisory services and asset management services whilst unlicensed.

The Court also found that Cedan, Hamtron, Cardan and Mutual Hope have aided, abetted or assisted Cardell, Waldmann and Doyle in their contraventions of the SFO.

An administrator has been appointed to administer the process of distributing the proceeds of the boiler rooms frauds remaining in the four frozen Hong Kong bank accounts – approximately a sum of $600,000 – for the benefit of the 14 victims on a pro rata basis.