Envy nickel trading fraud: Chief investment officer of related firm fined over conflicts of interest

There were a total of 122 investors in the fund. From around May 2020 to February 2021, Envysion and the fund invested about S$56.5 million and US$15.4 million (S$19.9 million) of their funds received from investors with Envy Global Trading.

All three Envysion directors made significant personal investments into the nickel trading scheme as well, with Doo investing over S$1 million into the scheme from around mid-2019.

The scheme later collapsed as Envy Global Trading did not have the purported nickel stockpile from Poseidon, or the purported forward buyers. Investors in the fund lost a total of about S$67 million.

As chief investment officer, Doo’s role was to oversee the investment team. He had extensive experience in the banking industry before joining Envysion, including as head of structured products, Asia, at Julius Baer, and global product manager for Fixed Income, as well as acting global head of FX, Rates, and Commodities in Standard Chartered Bank, Singapore.

CONFLICTS OF INTEREST

Envysion’s CEO, Shim, was friends with Ng. When Shim did not have enough capital to fund the paid-up capital for Envysion at the time it was set up, Ng offered to lend her money.

He later lent her a total of S$5.5 million, which was used for Envysion’s business operations. The loan agreement signed by the pair stated that they were an “investment” in Envysion Holdings and could be converted into a 50 per cent shareholding in Envysion Holdings.

The loans were significant to Envysion’s operations. For example, in March 2020, MAS informed Shim that Envysion was in breach of its financial regulatory requirements as its base capital had fallen below its minimum regulatory requirement and also that its financial resources had fallen below 100 per cent of its total risk requirement.

After this, Shim received loans of S$1.1 million from Ng in early March 2020, which were injected into Envysion to meet the MAS requirements.

She took a further personal loan of S$2 million from Ng in August 2020, which she in turn loaned to Envysion.

Around the second half of 2020, Shim informed Doo that she had taken a personal loan of S$5 million from Ng, and that she had invested the money into Envysion.

Doo was not aware of the exact terms of the loan or the exact details of how the money was invested.

These loans were not repaid to Ng during the course of the fund’s investments into the nickel receivables scheme.

Envysion earned referral fees from Envy Global Trading for referring clients to subscribe to the nickel receivables scheme, through their subscriptions in the fund.

These fees were a significant source of revenue for Envysion, with the referral fees amounting to S$3.3 million in 2020, approximately 65 per cent of Envysion’s total revenue for that year.

Around July 2020, Doo began to be uncomfortable with the investments in the nickel scheme. This was because Envy Global Trading did not provide Envysion with enough supporting documents for the scheme despite repeated requests by Envysion, including shipping and insurance documents, among other reasons.

However, Doo also knew that Envysion’s most significant revenue stream was from the fund. Because of this, it was not feasible to cease Envysion’s investment into Envy Global Trading’s nickel trading scheme without Envysion having to take significant steps to reduce its personnel and costs for its continued operations.

At the same time, Doo was making various attempts to diversify Envysion’s revenue stream.

Given Envysion’s investments through its fund into the nickel scheme, the personal loans Ng gave to Shim and the referral fees received by Envysion amounted to conflicts of interest in the management of the fund between the investors’ interests and Envysion’s interests.

Because of the loans that could potentially be converted into a 50 per cent shareholding in Envysion Holdings, which owned Envysion Wealth Management, Ng had potential indirect influence over Envysion.

As the referral fees formed a large part of Envysion’s revenue, Envysion had a significant financial incentive to invest through the fund into the nickel scheme and to persuade its clients to do the same, the prosecution said.

Despite this, Envysion failed to mitigate the conflicts of interest. It made only generic disclosures but did not disclose the significant loans Ng had given Shim, which were used for Envysion’s business operations, or the extent of the proportion of Envysion’s revenue made up by the referral fees from Envy Global Trading.

The prosecution sought a fine of S$10,000 to S$12,000 for Doo, saying he was an experienced banking professional who was to oversee the evaluation of investment opportunities for Envysion.

“We recognise that the accused himself was a victim in Ng’s scheme and suffered personal losses,” said Deputy Public Prosecutor David Koh.

“Nevertheless, the accused bears significant responsibility given his role in Envysion for the regulatory failures. The accused was increasingly uncomfortable with Envysion’s investment into the fund, but decided that there was no choice but for these investments to continue,” he said.

“Envysion also took no steps to mitigate the very substantial conflicts of interest between the interests of its clients and its own interests – a fundamental breach of its licensing conditions which was contributed to by the accused’s neglect.”

Doo could have been fined up to S$50,000 for his offence.