SINGAPORE - A former managing director of a company is the first person to be sent to jail for using crowdfunding to secure monies for small and medium-sized enterprises despite not having a licence to do so.
Nancy Tan Mee Khim of Noble Consulting Group was sentenced to eight months' jail on Wednesday (June 3).
Tan, who the prosecution described as the "directing mind" of the company, secured funding for four clients, raising a total of $15.4 million between July 2013 and December 2015.
In return, the company she was with received a commission of 15 per cent of the funds raised.
When two of the clients defaulted on interest and principal repayments in 2015, it led to around 100 investor-lenders losing a total of $9.5 million.
Tan was convicted on March 19 after a trial, making her the first person to be prosecuted under Section 82 of the Securities and Futures Act involving crowdfunding activity.
The court heard that the 41-year-old had set up the company under a different name, Angel Capital Consultancy in 2013, with Mr Steven Ling Hoe Khing.
The company was later renamed Noble Consulting Group in June the following year. Mr Ling resigned in July 2014.
Noble sourced for its clients through a loan broker and newspaper advertisements, and conducted general checks to see if the potential client companies were profitable.
The company also required the potential clients to provide financial statements for the previous two years, a list of their past, current and future projects, as well as documents showing payments they had received for past projects.
Between 2013 and 2014, Noble entered into consultancy agreements with four clients: Krish Chartered Bus Services, Glen Iris (International), Soilwood, and a group of companies comprising Adydas Marine Services, T S Marine Engineering Services and Scantech Marine.
Noble then solicited investments from the public for its clients through organised seminars advertised in The Straits Times, and created marketing materials such as brochures and flyers to disseminate to potential investors.
Noble also appointed around 10 to 13 agents as portfolio consultants to solicit lenders, and took part in investment exhibitions and fairs such as the Invest Fair at Suntec City in 2014 and the Smart Expo at Marina Bay Sands in 2015.
Tan gave instructions to the portfolio consultants and Mr Ling to encourage the public to invest in their clients as these companies had "good future prospects".
Investments or loans of between $25,000 and $200,000 were offered at various interest rates promising investor-lenders up to 7 per cent per quarter.
Tan and Mr Ling would then engage solicitors to prepare the investment or loan agreements between the client companies and the individual investor-lender.
The investor-lenders also received personal guarantees provided by the directors of the client companies for the loans.
As the managing director, Tan received at least $440,000 in income between 2013 and 2015.
However, in 2015, two of Noble's clients - Glen Iris and Soilwood - began to default on interest and principal repayments. Glen Iris eventually wound up and its director was bankrupted, while Soilwood's director became uncontactable.
As a result, about 100 investor-lenders lost a total of about $9.5 million.
