More than 1,000 investors have taken to Singapore courts for legal action against Yau Kwok Seng, a Singaporean who alleged of managing a Ponzi oil investment scheme that defrauded thousands of investors of C$175 million (S$180 million).
The investors are suing Mr Yau via POA Recovery – which is a special purpose vehicle designated to help investors from different legal jurisdictions recover alleged damages – in which the trial will start on Tuesday (29 Sept), as reported by Business Times.
Aside from Mr Yau, the defendants listed under the legal action also include Capital Asia Group Pte Ltd (CAG) and Capital Asia Group Oil Management Pte Ltd (Cagom).
Earlier on 9 August, The Edge reported that a group of Malaysian investors lodged a police report against promoters of the scheme, and a similar police report was filed in Singapore on 26 June this year. Two Malaysian companies – Capital Asia Group Sdn Bhd and Proven Oil Asia Sdn Bhd – were issued with a police report on 28 July as promoters in Malaysia.
The scheme has perpetrated over 4,000 investors from Singapore, Malaysia, Hong Kong and Macau, which collectively poured C$175 million into the investment scheme between September 2012 and October 2015.
In the latest news, Mr Yau was accused of structuring and selling a sham investment product and “profiting handsomely in the process”. The plaintiff argued that he had promised investors 12 per cent per annum of returns for buying into crude oil barrels, but the product did not exist.
The plaintiff noted that Mr Yau had worked with a Canadian counterpart, Juergen Hainzl, for the investment scheme that allowed investors to buy barrels of crude oil at a 3 per cent “wholesale discount”.
It also offered the options for investors to take delivery of the barrels, or having Canadian-based oil and gas company owned by Conserve Oil Group Inc (COGI) who would sell the barrels to third-party buyers for them.
Business Times’ report highlighted that the cycle of purchasing and on-selling would take place every quarter, this means that investors will earn net profits on the sale of their oil barrels amounting to 12 per cent per annum.
The plaintiff seeks to prove that Mr Yau is aware, from the outset, about his Canadian counterpart’s intents of using investors’ capital to fund purchases of oil and gas properties, not crude oil barrels.
The plaintiff also argued that investments into land and soil fields involved a “materially different level of risk” from the purchase of existing oil barrels, claiming that the alleged bore the hallmarks of a Ponzi scheme.
Additionally, Mr Yau was accused of “skimming off” up to 20 per cent of the capital from each investor and pocketing them as commissions for CAG.
According to court documents, the scheme “collapsed” in October 2015 when COGI went into receivership. This was also acknowledged by Mr Yau, CAG and CAG Oil Management, and they knew that the payments to the investors have stopped.
“In reality, the product described in the contractual documents and marketing materials was a sham. This case does not concern a failed investment, or a market gone sour. Yau was peddling a product that did not exist – one that was simply illusory,” said the plaintiff.
The defence – Mr Yau, CAG and CAG Oil Management – argued that the state of affairs was due to the collapse in oil prices.
“COGI’s financial position was in jeopardy and eventually its downfall dealt a fatal blow to the crude oil investments,” the defence argued, claiming that the crude oil was allocated to the investors and then resold to oil giants, which the returns reverted to the investors.
They also argued that stakeholders are aware of the money raised being used “for development and purchase of oil and gas leases/assets”, saying that “it bears repeating that this was a successful and lucrative investment product before the 2015 oil crash”.
The defendants pointed out that CAG should not be held liable for the statements and actions of sales agents and marketers because 90 per cent of marketing for the scheme happened outside Singapore.
Indicating commissions as standard practice in the industry, the defendants claimed that it was “absurd to suggest that there (was) any secrecy or concealment of any kind”.
Following the plaintiff’s claim that the defendants gained 18 to 20 per cent in commission, they argued that the associate marketing companies and sales agents earned higher, adding that the plaintiff is bringing the suit “for a collateral purpose”.