HK Mercantile Bourse Victim of False Papers, Cheung Says

Barry Cheung, the chairman and largest shareholder of Hong Kong’s failed commodities exchange, said the bourse is a victim after receiving false financial documents.

“We have been victims in all of this,” Cheung said by phone today. “We were provided with documents we did not know were false.” Police have arrested nine and charged four in connection with the case.

Hong Kong Mercantile Exchange surrendered its trading license in May after failing to attract sufficient revenue to support its operations. Ong Shen Kuo, who sent Cheung a false proof of funds for $516 million, was a middle man who didn’t know it was fake, his lawyer told a Hong Kong court today.

Ong sent the document in hopes of helping to broker a fundraising deal on behalf of Cheung, Ong’s lawyer Kevin Egan said today.

Cheung, who resigned on May 24 from all his public service positions including Hong Kong’s executive council, declined to comment on the specific case involving Ong.

“It’s unfortunate that every time this is mentioned we get dragged in,” he said. “We had nothing to do with it other than being provided with the false documents.”

Suspected Irregularities

The Securities and Futures Commission said on May 21 it found “serious” suspected irregularities in the exchange’s financial affairs and referred the case to the police. Three men who were first charged on May 24 with having false papers including letters related to a $460 million check and $11 million of funds are scheduled to appear in court tomorrow.

Cheung had previously said those three men weren’t current or former employees of the commodities bourse and declined to comment further.

HKMEx began trading gold futures in May 2011 and silver contracts in July that year, both denominated in U.S. dollars. Trading revenues were not enough to support operating expenses and resulted in it failing to meet the required regulatory financial conditions, the exchange said in a May 18 statement.

Since then, directors including William Barkshire, co-president of the exchange and Artem Volynets, former chief executive officer of Russian billionaire Oleg Deripaska’s En+ Group Ltd., resigned.

Barkshire resigned as co-president and his last day will be August 31, he said in an e-mail today. Raymond Ma, a spokesman for the exchange, didn’t immediately return a call for comment.

Before it's here, it's on the Bloomberg Terminal.