Equities trader used wife and mother-in-law’s joint account to profit from trades at company’s loss, gets jail

SINGAPORE: An equities trader opened a joint trading account in the names of his wife and mother-in-law to make loss-making trades for his company that he could benefit from.

Over a year and seven months, he made a personal profit of about S$120,000 at the expense of his employer, which suffered a loss of about S$60,000 in reduced profits.

Singaporean Pan Qi, 39, was sentenced to five weeks’ jail and fined S$120,000 on Tuesday (Apr 25).

He pleaded guilty to one count under the Securities and Futures Act of engaging in a course of business that operated as fraud, with another two charges taken into consideration.

The court heard that Pan worked as an equities trader at Nech Capital, a fund management company based in Singapore and registered with the Monetary Authority of Singapore (MAS).

The company manages alternative investments and hedge funds, including the Nech Asia Fund.

Pan was appointed equities trader and sub-trading manager of the Nech Asia Fund from Mar 1, 2018, and was responsible for trading with several trading accounts to make a profit for the fund.

He was given full discretion over trading strategy and was given trade support. The profit-sharing arrangement was such that Pan would be entitled to 50 per cent of his trading profits earned in the course of using the Nech Asia accounts, but would bear 100 per cent of his trading losses.

Between January 2019 and July 2020, he executed a series of trades in various securities between Nech Asia accounts and a joint trading account in the names of his wife and mother-in-law. 

He conducted the trades in a way that the joint account would buy low from and sell high to the Nech Asia accounts.

He executed 179 trades in this way, making a profit of S$107,595 in the joint account, excluding brokerage fees. He transferred the profits to a bank account he held jointly with his wife and used it for household and personal expenses.

In this period, the Nech Asia accounts remained net profitable, but the total capital gains earned was S$107,595 less than what would have accrued if Pan had not executed the trades. Under the 50 per cent profit-sharing arrangement it had with Pan, Nech Capital suffered a loss of profit of S$53,797.50.

From Aug 3 to Aug 14 in 2020, Pan repeated the same modus operandi to generate profits in his own Interactive Broker trading account, executing 41 trades for a profit of S$12,800.

MAS said in a statement after his sentencing that Pan’s conviction was the result of a joint investigation conducted by MAS and the Commercial Affairs Department of the Singapore Police Force.

The investigations against Pan arose from referrals by the Singapore Exchange Securities Trading Limited, said MAS.

Pan tried to make restitution to the director of Nech Capital in end-August 2020, but was informed that this was not required as Nech Capital did not intend to pursue the matter.

He was later given one month’s notice for termination of employment.

The prosecutor asked for at least five weeks’ jail and a fine of S$120,000 to disgorge any residual gains Pan had made.

Pan was hired for the sole purpose of using his skill and experience to engage in profitable trades for the Nech Asia Fund, but instead knowingly entered into hundreds of loss-causing trades in order to benefit himself, said the prosecutor.

This not only affected Nech Capital in terms of its profits, but resulted in the loss of customers’ confidence in the company’s ability to properly administer invested funds.

For engaging in a course of business which operated as fraud, he could have been jailed up to seven years, fined up to S$250,000, or both.