9 ex-directors, employees ordered to repay almost S$900 million to Envy companies in fraudulent nickel trading suits

[SINGAPORE] The High Court has ordered nine former directors and employees of the insolvent Envy group of companies – at the centre of the S$1.5 billion nickel trading fraud allegedly perpetrated by Ng Yu Zhi – to return almost S$900 million to the group for eventual distribution to creditors.

The nine were sued by Envy Global Trading, Envy Asset Management and Envy Management Holdings, as well as their three liquidators in a bid to claw back the various payments – including commissions, directors’ fees and salaries – made to them. The group of companies was insolvent from their inception.

In a 180-page judgment published on Tuesday (Jul 29), Judicial Commissioner Mohamed Faizal found that ex-directors Lee Si Ye (also known as Rhiya) and Ju Xiao were jointly and severally liable for the total sum of S$593 million, US$192.2 million and 880,000 euros (S$1.3 million).

Lee, a trained accountant, is fully liable for the entire sum, while Ju is responsible for up to 40 per cent of the quantum, the judge ruled.

Meanwhile, Cheong Ming Feng, an administrative executive, has to repay S$1.9 million but is allowed to have his salary payments and corresponding Central Provident Fund contributions set off against this liability.

In another judgment released on the same day, the judicial commissioner ruled that six other former employees – who the liquidators accepted were unaware of the fraud – were liable for about S$42 million in total, with each person’s payments ranging from S$370,882 to S$17.9 million.

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The six are Lau Lee Sheng, Benjamin Teo Wei Wen, Shen Xuhuai, Koh Hong Jie, Guo Yujia and Jordan Chua Wei Jian. They were employed in various capacities – including as sales directors, sales associates and financial accountants – by Envy Asset Management or Envy Management Holdings.

The sums claimed were paid to them as commissions, profit-sharing payment, referral fees or their investment returns from the purported nickel trading.

Lee and Ju breached director duties

Lee had been serving as a director and signatory of the Envy group for almost the entirety of its existence. She was a former director of Envy Asset Management and Envy Management Holdings until 2021, and is still a director of Envy Global Trading.

The 37-year-old held a minority stake in the Envy group.

Ju was a director of Envy Global Trading for less than a year when he resigned in late 2020, but he continued to be head of trading of the Envy group until May 2021.

The judge found that Lee and Ju had breached their duties as directors.

In particular, Lee was “shockingly derelict in her duties as a director” and her culpability was extremely high, despite the judge finding that she did not know fraudulent acts were taking place. Had it not been for Lee’s negligence, the losses of the Envy group would not have materialised.

“There were multiple red flags that should have put her on inquiry, and if she had acted diligently at any of those points in time, the losses could have been avoided, or at least minimised,” commented the judge.

She did not check or verify whether a company owned by Ng was legitimate or not, with the Envy group sending over S$400 million to that company.

Ju, meanwhile, was aware of, or at least wilfully blind about, the hollow nature of the scheme, concluded the judge. He was aware that the purported trading was amiss and also forged four contracts on Ng’s instructions even though there were no genuine underlying transactions.

He misapplied investors’ monies to conduct proprietary trading as well – a custodial breach of his fiduciary duties, noted the judge.

Cheong’s forgery

Cheong, however, is not liable for fraudulent trading, dishonest assistance or unlawful conspiracy, thus there is no basis for him to be jointly or severally liable for the sums sought.

Cheong knew that he was creating forgeries and that these were being circulated to internal employees and external investors, but he did not know that such actions were to prop up a non-existent scheme.

All the payments (including for profit sharing and commission, allowance, bonus and reimbursements, Lee’s director’s fees and dividends) to Lee, Ju and Cheong, as well as Ju’s basic salary, may be clawed back as these payments were eroded from the Envy group and from the reach of their creditors.

Lee and Cheong were allowed to keep their basic salaries as they had acted in good faith and provided adequate value for the payments. The basic salary payments were contractual obligations which were not contingent on the Envy group being profitable.

“The employee or director’s breach of their duties would not disentitle them to their salary,” the judge reasoned.

In contrast, Ju was aware of the fraudulent nature of the scheme, and thus would not be able to pocket his basic salary.

The commission and profit sharing payments, on the other hand, hinged on whether there were profits or returns from the investments into the purported trading, but it was a scheme that had no “profits” or returns to speak of.

Six other defendants

Among the other six former employees found liable, Envy Asset Management and Envy Management Holdings sales directors Lau and Teo were ordered to repay the largest sums of S$17.9 million and S$10.2 million, respectively.

However, these six defendants may set off any excess income tax they paid as a result of their receipt of the payments against the sums they are now ordered to repay in this judgment. This was because they had incurred an increase in income tax as a result of receiving the payments now being sought.

Shook Lin & Bok acted for the plaintiffs in both suits.

Largest Ponzi scheme in Singapore

Between 2015 and April 2020, Envy Asset Management purportedly engaged in physical nickel trading by purchasing quantities of London Metal Exchange Nickel Grade Metal at a discounted rate, before selling the metal at a higher price to third-party buyers.

After the Monetary Authority of Singapore placed Envy Asset Management on its investor alert list for being wrongly perceived as being licensed to carry out such trading, the business was transferred to Envy Global Trading, owned by Envy Management Holdings.

The largest Ponzi scheme in Singapore’s history attracted about S$1.5 billion in funds from investors that included financiers and lawyers. About S$854 million is still owed to them.

Ng, the apparent protagonist and mastermind of the scheme, held a majority of the stakes in the Envy companies, and was a director of Envy Asset Management and Envy Global Trading.

He was declared bankrupt in 2022 after the liquidators received a partial summary judgment – which was passed in their favour without having gone through a trial – for about S$416.4 million and US$17.6 million over his alleged acts.