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SINGAPORE: A market maker, who is pending a jail term for market rigging, testified on Monday (Feb 9) in the trial of former New Silkroutes Group (NSG) chief executive officer Dr Goh Jin Hian.
Huang Yiwen shared how he came to be engaged by NSG for S$60,000 (US$47,300) a month to increase its share price, and how he did not know that Dr Goh was allegedly trading on his own.
Dr Goh, the 57-year-old son of former prime minister Goh Chok Tong, is on trial for multiple charges of false trading, along with former chief corporate officer of NSG, 55-year-old Kelvyn Oo Cheong Kwan.
The pair are accused of conspiring with former NSG finance director William Teo Thiam Chuan and market maker Huang Yiwen to create a misleading appearance of NSG's share price, by placing orders and executing trades for NSG shares over 31 dates between Feb 26, 2018 and Aug 27, 2018.
Teo was given 12 weeks' jail in September last year, while Huang, who was involved in four conspiracies to rig the market or price for share or unit counters, was sentenced to jail for over two years in August last year.
HUANG TESTIFIES ABOUT HOW HE WAS HIRED BY NSG
Huang, who is waiting to begin his jail term, testified as the prosecution's second witness on Monday.
He was the sole shareholder and director of a designated market maker called GTC Group. Market makers provide liquidity in the market, continuously providing both bid and ask quotes for securities and earning a profit from the bid-ask spread. This is the difference between the market maker's buying and selling price.
While SGX allows companies to engage market makers to provide liquidity in the market, a market maker is not allowed to do anything to create a false or misleading appearance of active trading.
Huang testified that he first met Teo, then the finance director at NSG, at a drinking function. He was introduced to Teo by somebody from Chinese securities firm Haitong Securities.
Subsequently, he said Teo approached him for market making services, saying NSG needed them.
Huang said he later met Dr Goh at a meeting with Oo and Teo. On questioning by the prosecution, Huang said Dr Goh was the most senior of the three men from NSG.
Huang said Dr Goh told him that there was a conflict with a shareholder who wanted to brand NSG as a financial company, while Dr Goh wanted it to be a medical company.
Because of this conflict, the unidentified shareholder was allegedly dumping shares into the market, pushing the share price down, said Huang.
NSG wanted a higher share price as Dr Goh, Oo and Teo did not want it to be lower than a previous placement, and a higher share price would make it easier for them to carry out further corporate actions, such as the acquisition of medical clinics.
The prosecution's case is that NSG used its shares as currency, either by issuing shares as consideration for acquisitions or by issuing fresh shares to raise capital.
At this meeting, Huang said the three men from NSG said they did not want the share price to be lower than "40 over" cents.
Huang said he pitched the value of market making to the trio, saying liquidity would improve for the stock, leading to greater investor confidence and interest in the stock. The price of the stock would slowly increase, and this is helpful in a scenario where an investor is selling a lot of shares.
However, he told the men that it would usually take three to six months to see a positive impact on the shares.
Huang charged S$60,000 a month for his market making services and required a deposit of three months.
However, after he began providing such services, the share price dropped to over 30 cents and a meeting was held where the men from NSG wanted Huang to come up with strategies to push up the share price, said Huang.
He said that while he told them that it took three to six months for the market making to take effect, Teo wanted "a more immediate effect" as the company wanted "a more immediate price" and did not want to wait so long.
The prosecution flashed a series of texts between Huang and Teo where they discussed buying bids, the share price and other actions.
According to the prosecution, Teo placed orders and executed trades for NSG shares using NSG's share buyback trading accounts on 13 days, while Huang placed such orders and executed such trades using the trading account of GTC Group on 30 days.
According to the prosecution, Dr Goh then bought 1,000 NSG shares at 25.5 cents and 100 NSG shares at 26 cents in September 2018.
When asked about Dr Goh's orders on a particular day in March 2018, Huang said: "I didn't know he was trading."
Lead prosecutor Suhas Malhotra asked Huang what he knew about the other orders placed by Dr Goh, and Huang again said: "I didn't know that he was trading."
The investigation officer on the case earlier testified that the police uncovered the alleged offences by Dr Goh and Oo when investigating Huang's alleged conduct of pre-arranging trading in public listed shares.
The trial continues.
Dr Goh is represented by Senior Counsel Tan Chee Meng, Mr Paul Loy and Mr Samuel Navindran from WongPartnership.
Allen & Gledhill's Senior Counsel Jason Chan, Ms Leong Yi-Ming and Mr Nikhil Coomaraswamy represent Oo.
If convicted, the men face a jail term of up to seven years, a fine of up to S$250,000, or both for each charge.
