Ex-Advisor to CY Leung Guilty of Defrauding SFC

Barry Cheung, previously chairman of the Hong Kong Mercantile Exchange and advisor to ex-chief executive of the city Leung Chun-ying, was found guilty for defrauding the Securities and Futures Commission.

A district court in Hong Kong found Cheung guilty of defrauding the Securities Futures Commission (SFC) during his time as head of the Hong Kong Mercantile Exchange (HKMEx) between May 2012 and the bourse’s collapse in May 2013.

According to court filings, Cheung had defrauded the SFC by hiding HKMEx’s true financial position and misled the regulator in order to retain its license. The court also found Cheung guilty of fraud in relation to transferring HK$30 million ($3.9 million) from a company called Sinomax Finance into another business he owned.

 Cheung pleaded not guilty to both offenses. 

«I Did Not Believe the Defendant»

According to Judge Amanda Woodcock, Cheung’s evidence was «tailor-made to exonerate or distance himself from the offenses» by demonstrating that he was neither hands-on nor informed about the minute details of the exchange’s financial position. 

But the evidence overwhelmingly suggested otherwise, she added, including from Jacky Choi, ex-chief financial officer of HKMEx who earlier pleaded guilty to the SFC fraud charges and became a prosecution witness.

«I did not believe the defendant in the witness box,» Woodcock said in a 131-page judgement. «[Cheung] had given general instructions to [Choi] to do what he needed to do to present an acceptable cash balance to the SFC. As a result, [Choi] did what he could do to deliberately conceal, when it was necessary, the true financial position of the Exchange from the SFC.» 

Official Support

In requesting for leniency, the defense lawyer submitted 11 reference letters from those who knew Cheung including senior officials in the city. One such supporter was Executive Council member Fanny Law whose letter quotes Carrie Lam, current chief executive and then development secretary of Hong Kong, saying Cheung was «not even one of the best, but the best of non-official public servants».

Sentencing has been adjourned to July 23 while Cheung and Choi would remain under custody after bail applications for both were rejected.

In addition to his HKMEx role, Cheung was the chairman of Leung’s campaign during his 2012 chief executive election and was made a non-official member of the executive council afterward. He also served as chairman of the Urban Renewal Authority from 2007 to 2013 before resigning when the HKMEx scandal first unraveled.