Hong Kong Corruption Police Files Fraud Charges Against Cho

(Bloomberg) -- One of Hong Kong’s biggest financial regulatory investigations saw its first charges filed Thursday.

Cho Kwai-chee, founder of the city’s largest private health-care group, was charged with conspiracy to defraud Hong Kong’s stock exchange and a listed firm where he was director, anti-corruption police said in a statement. Cho benefited financially when he caused Convoy Global Holdings Ltd. to buy an investment company he owned for more than HK$89 million ($11.3 million), the Independent Commission Against Corruption alleged.

“He is innocent of the charge,” Cho’s lawyer Wong Ching said after Cho appeared before a judge Thursday, dressed in a dark suit and held in a metal pen. He was released on HK$700,000 bail.

Hong Kong Corruption Police Files Fraud Charges Against Cho

Cho, the 55-year-old doctor-turned-financier, was at the center of a “sophisticated scheme” to misuse an investment into Convoy, according to details in two lawsuits filed by Convoy management in late 2017 and early 2018. Several companies that were part of a web of cross-shareholdings identified and named the “Enigma Network” by activist investor David Webb were involved, the filings said.

Insurance and securities brokerage Convoy was used by Cho to make margin loans to other businesses connected to him, and he directed confidants at the firm through a secret email account even though he didn’t own a controlling stake, according to the lawsuits filed by Convoy’s new management.

Firms connected to Cho, which included businesses as diverse as finance, LED lighting and education, allegedly bought and sold each other’s shares to artificially pump up prices while diverting millions of dollars of investors’ money into their own pockets, the Convoy lawsuits said.

The judge on Thursday granted Cho permission to visit Australia in late May. Cho and his family are applying to immigrate to the country under an investment migration program and he must appeal in person a previous rejection of his application, Cho’s lawyer told the court.

Prosecutors argued that if Cho left the city, he might not return because Cho had previously disappeared for 10 months from late 2017. Cho secretly owned more than half of Convoy’s shares, the prosecution said.

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