SINGAPORE - He was one of three directors of a firm that sold gold to more than 2,000 unsuspecting customers under a "buyback" arrangement, bringing in revenue totalling more than $120 million.
Wong Kwan Sing, 50, who was part of The Gold Label (TGL), pocketed at least $598,000 for himself.
But a district court heard on Friday (Jan 14) that TGL had perpetrated a Ponzi scheme.
Deputy public prosecutors Edwin Soh and Grace Teo stated in court documents: "This buyback scheme guaranteed the clients a return on their initial investment to purchase the gold, in addition to high payouts.
"Behind the scenes, TGL had no investments or profit-generating business to sustain such payouts. It simply depended on the money from new gold sales to satisfy the payment obligations to its older customers."
Over time, TGL did not have enough money to fulfil its obligations when they were due.
TGL's payout and buyback obligations to clients later came up to some $85 million, with the company having a fraction of the amount - about $450,000 - in its bank accounts.
Wong, a Malaysian, was on Friday sentenced to two years and 10 months' jail after he pleaded guilty to an offence under the Companies Act.
TGL was incorporated on April 28, 2009, and wound up in February 2011.
The cases involving another two of its former directors, Singaporean Iseli Rudolf James Maitland, 62, and Malaysian How Soo Feng, 47, are pending.
Wong became a director at TGL on Nov 20, 2009, before resigning on Sept 3, 2010.
The prosecutors said that the gold buyback scheme was the trio's brainchild.
Explaining how it worked, the DPPs said that TGL would enter a contract to sell gold bars to a client.
The bars would be sold at an average of 24 per cent above the prevailing gold market price.
During the contract, the client would receive payouts ranging from 3.5 per cent to 12 per cent of the TGL selling price, depending on the contract type and duration.
At the end of the contract, the client had the option to sell the gold bars back to TGL or keep the gold bars.
If the client exercised the sell-back option, TGL was obligated to buy back the gold bars at the price set at the point of purchase.
This meant that the client would get a full refund of the price paid for the gold bars in addition to the payouts.
The court heard that TGL also paid out "exorbitant" directors' fees, of which Wong collected at least $598,000.
The DPPs said that this gold buyback scheme was "inherently unprofitable".
"TGL was essentially a Ponzi scheme using sales generated from new contracts to fulfil its existing payment obligations and to foot its other expenses. By the time the accused ceased being a director... TGL did not have enough money to pay its obligations when they fell due."
TGL's pay-out and buy-back obligations to clients under these contracts later came up to around $85 million.
The DPPs told the court: "As TGL delivered actual gold to its clients, these clients would be able to mitigate their losses by selling the gold to the market.
"However, this was subject to the market price of gold at the time TGL's clients sold their gold bars - if they did sell. Investigations reveal that as at Oct 7, 2010, TGL's clients still stood to lose approximately $12 million from the unfulfilled contracts."
Wong had earlier failed to turn up in court on July 22, 2020, and absconded to Malaysia.
He was later caught and sent back to Singapore, where he decided to plead guilty.
Wong, who was unrepresented, told the court on Friday that he is now "penniless".
He has made no restitution.