Public Prosecutor v Ee Cho Lian

• Jurisdiction: Singapore
• Judge: Kaur Jasvender
• Judgment Date: 05 July 2021
• Neutral Citation: [2021] SGDC 124
• Court: District Court (Singapore)
• Docket Number: DAC 915066 of 2020 & Ors, Magistrate’s Appeal No. MA-9122-2021-01
• Published date: 09 July 2021
• Year: 2021
• Hearing Date: 27 April 2021,19 May 2021
• Plaintiff Counsel: Ms Kang Jia Hui (Attorney-General's Chambers)
• Defendant Counsel: Tan Hee Joek (Tan See Swan & Co.)
• Subject Matter: Criminal law,Offence,s 201(a) Securities and Futures Act (Cap 289, Rev Ed 2006)
• Citation: [2021] SGDC 124

District Judge Kaur Jasvender:

The accused faced 60 charges under s 201(a) and punishable under s 204(1) of the Securities and Futures Act (Cap 289, Rev Ed 2006) (“SFA”) for employing a scheme to defraud and three charges under s 201(b) and punishable under s 204(1) of the SFA for engaging in a practice which operated as a deceit on City Index Asia Pte Ltd (‘City Index’). He pleaded guilty to 20 charges under s 201(a) of the SFA and one charge under s 201(b) of the SFA. The remaining 42 charges were taken into consideration with the consent of the accused for the purpose of sentence.

He entered 107 false orders (35 for proceeded charges and 72 for the TIC charges) and executed 60 spoof trades. The total profit from the 60 spoof trades was $24,195.83. He was sentenced to three weeks’ imprisonment on each of the s 201(a) charges with two sentences to run consecutively. He was fined $30,000 (in default one month’s imprisonment) on the s 201(b) charge. His total sentence was six weeks’ imprisonment and a fine of $30,000. He has paid the fine.

The prosecution has appealed only in respect of the sentences imposed on the s 201(a) charges. The prosecution has sought a 14-week term. Accordingly, a stay on the execution of the sentence was granted.

Summary of facts

The accused had a Contracts for Differences (‘CFD’) trading account with City Index, a cash trading account with Lim & Tan Securities Pte Ltd (‘L&T’) and a margin trading account with L&T. His CFD account was terminated by City Index on 30 April 2018. Thereafter, the accused used three CFD accounts belonging to his friends with City Index to make the CFD trades.

The accused transacted in CFDs which were based on securities listed on the Singapore Exchange Securities Trading Limited (‘SGX’). The accused knew that the CFDs for securities that he was transacting with City Index were generally priced according to the real-time prices of underlying securities listed on SGX. This meant that the CFD provider would generally allow investors to execute long trades based on the lowest price the underlying security could be bought off SGX and investors could execute short trades based on the highest price the underlying security could be sold on SGX. Hence, the accused decided to profit from trading in CFDs by influencing the prices of the underlying securities. This strategy to defraud is known to the trade as ‘spoofing’.

The strategy involved entering fraudulent orders in the securities market to artificially increase the best bid price and decrease the best offer price of the underlying securities in order to fraudulently induce City Index to react to the deceptive market information that had been created, and with the intent to cancel the bid or offer before execution. The accused’s strategy moved the prices of CFDs in a direction favourable to him, enabling him to purchase CFDs at prices which are lower and to sell at higher prices. Using this technique he profited at the expense of City Index, as City Index would have to pay him based on his trades in the CFDs and could not hedge the transactions (reduce its risk in the transaction). In a typical trade, a CFD provider hedges the transaction by transacting in the underlying asset at prices of CFDs bought and sold, so that the CFD provider can pay investors if the investors make a profit from the profit the CFD provider makes itself in the securities market. However, when the accused executed his scheme, City Index was unable to perform these underlying trades as the accused removed the false orders in the securities market before City Index could execute such trades.

He engaged in trading on 31 separate days over a period of eight months in April, May, June, July, October, November and December 2018. He executed the strategy in respect of three SGX-listed securities. He entered 107 orders through the securities accounts and 60 trades through the CFD accounts to make a total profit of $24,195.83. The accused made restitution of $18,378.95 to City Index, which City Index accepted as final settlement taking into account the commissions and taxes incurred on the trades.

The 60 CFD trades and the individual profit is listed in the Annex to the SOF. The details in respect of the 20 proceeded charges are found at [24] to [44] of the SOF.

Address on sentence

The prosecution sought a global imprisonment term of at least 14 weeks’ imprisonment for the s 201(a) charges. The following factors were highlighted.

Extent of gain

The accused made a profit of $24,195.83. The prosecution agreed that credit ought to be given for the restitution of $18,378.95 (excluding commission and taxes).

Extent of premeditation and sophistication

There was a high degree of premeditation to design a sophisticated modus operandi that was well thought out. The design of the fraudulent scheme was such that the accused would always profit at City Index’s expense by ensuring that the buy price of the CFD would always be lower than the sell price as he could set both by swiftly deleting the buy and sell orders on SGX for the underlying securities, often (if not always) within seconds.

Use of multiple accounts

The accused was not deterred when his City Index CFD trading account was terminated. Instead, he boldly asked three friends for access to their accounts to continue the fraudulent trades.

Difficulty of detection

It is difficult for regulators to discern whether the placing of the orders and then cancelling them subsequently is for legitimate reasons or not. As the accused manipulated the prices of the underlying securities on the market, the exchange regulator and the CFD provider would each only see half of what the accused was doing. This makes it extremely difficult for detection.

Frequency and duration

The accused made a total of 60 fraudulent CFD trades over eight months.

Motivation

The spoofing was carried out with the motive to profit. The commission of an offence for personal gain is generally an aggravating consideration.

Mitigation

The accused is 50 years of age. He is single and resides with his partially disabled sister and brother who suffers from cancer. His parents passed away when he was a first year undergraduate and he supported himself during his tertiary studies. He worked as an account manager at a chemical specialist company since 2007. He resigned in March 2021 due to the criminal proceedings.

The accused started trading in CFDs with City Index in November 2017 until his account was closed on 30 April 2018 without any reasons provided to him. The accused then used the accounts of his three friends to trade.

The defence relied on the following personal mitigating factors.

Full restitution

The accused made full restitution to City Index of $18,378.95 after deduction of the commissions and tax. The restitution was made ‘at the earliest opportunity once the figure was settled by the Prosecution after representations’.

Good character

The accused had an unblemished record. He has contributed back to the community by participating in charitable and social work.

Full cooperation with authorities and plea of guilt

The accused fully cooperated with the Commercial Affairs Department (‘CAD’) and provided all the information requested. He also pleaded guilty.

Learned counsel highlighted the financial impact on the accused. He suffered a loss of about $5,700 due to the CFD positions that he was forced to...