High Court dismisses claim by firm representing over 1,000 investors that oil investment was Ponzi scheme

High Court judge Choo Han Teck rejected the plaintiff's allegations of fraud and misrepresentation and ruled that the investments were legitimate.
High Court judge Choo Han Teck rejected the plaintiff's allegations of fraud and misrepresentation and ruled that the investments were legitimate.PHOTO: ST FILE

SINGAPORE - A $1 shell company that was set up to pursue the claims of more than 1,000 investors across Asia has lost its case in the High Court here.

The company, POA Recovery, alleged that Singaporean Yau Kwok Seng was running a Ponzi scheme and had defrauded investors into investing in crude oil produced in Canada.

It sued Mr Yau, who marketed the investments, and his companies Capital Asia Group and Capital Asia Group Oil Management.

More than 4,000 investors in Singapore, Malaysia, Hong Kong and Macau were said to have poured C$175 million (S$183 million) into the scheme between 2012 and 2015.

On Thursday (Feb 18), High Court Judge Choo Han Teck rejected the plaintiff's allegations of fraud and misrepresentation and ruled that the investments were legitimate.

In a written judgment, the judge noted that the investments were successful until crude oil prices collapsed globally at the end of 2015.

Under the scheme, investors bought crude oil from Canadian company Proven Oil Asia (POA) and were supposed to receive returns after the oil is resold.

For earlier investments, investors were paid the agreed 3 per cent quarterly returns and obtained full capital refunds. When oil prices fell in 2015, POA and its parent company could no longer pay the investors.

Justice Choo found that if the investors had been misled by promises of capital protection, these promises were made by the Malaysian and Hong Kong sales agents, and not by Mr Yau.

About 90 per cent of the investors represented by POA Recovery are from Malaysia and Hong Kong.

Mr Yau added 66 sales agents as third parties to the suit to bear the liability in the event the plaintiff's claim succeeded.

He also added as third parties two major investors: Hong Kong businessman Thomas Luong and trained accountant Joseph Li, who is a representative of a Macau luxury watch company.

In the aftermath of the oil crisis, Mr Li and Mr Luong gained control of a Canadian company that held assets acquired with investment monies.

Justice Choo accepted Mr Yau's claim that the investors could have recovered more than 1 per cent of their investment capital if not for the pair's "questionable dealings".

The judge added that POA Recovery, which was set up by Mr Li and Mr Luong, had no legal standing to bring the suit.

He agreed with Mr Yau's lawyer, Ms Melanie Ho, that structuring a legal action in this way was contrary to public policy as the defendants would have no one to look to for costs except the solitary shareholder of a $1 shell company.

"The investors must comply with the law if they wish to pursue their rights in court," said the judge.

He added that they should sue individually and then proceed with one suit, consolidate their suits or file a representative suit.

In a statement, Mr Yau described the verdict as a "bittersweet victory" and thanked his legal team from WongPartnership.

"While I am grateful to be vindicated of any wrongdoing, I have not forgotten that many investors had suffered losses, including myself and my family," he said.