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RBC Joins Goldman in Suing Clients After Singapore Crash

By Andrea Tan and Jonathan Burgos
April 10, 2014 5:42 AM EDT 7 Comments
Royal Bank of Canada (RBC) signage is displayed outside a branch in Vancouver.
Photographer: Ben Nelms/Bloomberg
Royal Bank of Canada (RBC) signage is displayed outside a branch in Vancouver.

Royal Bank of Canada sued three private wealth clients in Singapore, joining companies including Goldman Sachs Group Inc. seeking money owed by customers after an October stock rout.

Blumont Group Ltd. (BLUM)’s Executive Chairman Neo Kim Hock and Executive Director James Hong and businessman Nelson Fernandez owe the Canadian bank a total of $63.3 million, according to lawsuits filed in the Singapore High Court. The men refused to pay after shares in companies such as Blumont, Asiasons Capital (ACAP) Ltd. and LionGold Corp. (LIGO), held as security, tumbled in the October crash, the bank said in court papers.

This brings the total banks and brokers are seeking to recover from the crash to at least $210 million. Singapore’s central bank and white-collar crime agency last week widened their probe into suspected stock-trading irregularities around the plunge of the three commodity companies that erased $6.9 billion in market value. Investigators are seeking electronic data from Neo, Hong and executives from six other companies.

“There seems to have been a coordinated effort to bring about the rout that wiped out that much market value in such a short period of time,” said Desmond Chua, a Singapore-based strategist at CMC Markets. Investigations have still not explained the crash, he said.

Royal Bank is seeking $22.8 million from Neo, $17.8 million from Hong and $22.7 million from Fernandez. All three men applied to open accounts with the bank in April 2013 and had as much as $30 million each in credit facilities, according to court papers.

‘No Prospects’

The bank’s lawsuit against Hong “has no prospect of success” and should be dismissed as it’s frivolous, Hong said in his defense filed March 21.

Neo and Fernandez haven’t filed their defenses and didn’t reply to three e-mails each or return calls seeking comment. Hong and Peter Hoflich, a Singapore-based spokesman for Royal Bank, declined to comment.

Bank lawsuits against Neo have locked up his remaining Blumont shares, leading Alexander Molyneux, who has been appointed to succeed Neo as chairman, to abort a plan to buy 135 million shares of the company.

Neo faces at least another three lawsuits over the stock crash. Coutts & Co. and Interactive Brokers LLC sued Neo for a total of S$46.4 million ($37.1 million). Phillip Securities Pte, Singapore’s biggest brokerage by clients, sued on Feb. 24 after he refused to pay S$1.42 million.

Shareholders

Phillip Securities filed at least three other lawsuits on the same day, claiming it’s owed a total of S$5.86 million by Fernandez, Blumont shareholder Ooi Cheu Kok and Lee Chai Huat, according to court papers. The men haven’t filed their defenses to the brokerage’s lawsuits. Ooi didn’t reply to two e-mails or return a call seeking comment. Lee and Kevin de Souza, a lawyer for Phillip Securities, declined to comment.

Blumont in July announced it bought Lee’s stake in Powerlite Ventures Ltd. for $7.9 million. Fernandez held a 19 percent stake in Acadian Mining Corp. before LionGold took the Canadian gold miner private in October, according to data compiled by Bloomberg.

The sudden slump after Asiasons, Blumont and LionGold reached record highs in the past year triggered trading curbs and proposals for tighter rules. The average value of shares traded in Southeast Asia’s largest equities market fell 20 percent in the three months ended Dec. 31 from a year earlier.

Blumont fell 7.7 percent to close at 3.6 Singapore cents, its lowest close since Aug. 7, 2012. LionGold declined 6.4 percent to 10.3 Singapore cents, the lowest since March 10 and Asiasons fell as much as 2.1 percent before ending unchanged at 4.7 Singapore cents.

‘Pump and Dump’

As part of their wider probe, Singapore investigators asked Annica Holdings Ltd., Magnus Energy Group (MAGE) Ltd., Innopac Holdings Ltd., ISR Capital (ISR) Ltd., ITE Electric Co. and Ipco International (IPCO) Ltd. or their units to assist in the investigations.

Interactive Brokers, a Connecticut-based online broker, has accused Neo, Ipco Chief Executive Officer Quah Su Ling and six others of a “pump and dump” plan to rig shares of the three companies, according to a lawsuit seeking to freeze S$79 million of their assets. At least two of the eight have claimed the brokerage was involved in a “commission-generating scheme,” which it denies. The eight haven’t otherwise commented on the accusations.

Quah didn’t reply to two e-mails seeking comment.

Goldman Suit

Goldman Sachs has denied claims by Blumont’s Hong and Ipco’s Quah in London that it dumped shares of Blumont, Asiasons and LionGold held as collateral after they couldn’t meet repayment demands. It countersued in December to recover $26.8 million. Edward Naylor, a Hong Kong-based spokesman for Goldman Sachs, declined to comment.

About two dozen lawsuits have been filed by companies including Julius Baer Group Ltd. (BAER), Bank of East Asia Ltd., Malayan Banking Bhd. and AMInvestment Bank Group’s AMFraser Securities Pte. over the October crash.

The cases are Royal Bank of Canada (RY), Singapore branch v James Hong, S132/2014. Royal Bank of Canada, Singapore branch v Nelson Fernandez, S1135/2013. Royal Bank of Canada, Singapore branch v Neo Kim Hock, S1133/2013. Phillip Securities Pte v Lee Chai Huat, S211/2014. Phillip Securities Pte v Neo Kim Hock, S212/2014. Phillip Securities Pte v Ooi Cheu Kok, S213/2014. Phillip Securities Pte v Nelson Fernandez, S214/2014. Singapore High Court.

To contact the reporters on this story: Andrea Tan in Singapore at atan17@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editors responsible for this story: Douglas Wong at dwong19@bloomberg.net; Sarah McDonald at smcdonald23@bloomberg.net

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