SINGAPORE - The liquidators of Envy Asset Management, the company at the heart of a US$1.1 billion (S$1.5 billion) fraudulent nickel trading case, have been successful in their legal bid to claw back $2.3 million from a unit of Chuan Hup Holdings.

The High Court ruled that the purported investment return of $2.3 million received by CH Biovest from Envy Asset Management was paid with the intent to defraud Envy Asset Management’s investors in the “Ponzi scheme”. Thus, the wholly-owned subsidiary of mainboard-listed Chuan Hup would have to refund this amount.

This could pave the way for the liquidators to pursue legal proceedings against other investors who have withdrawn profits from their investments with Envy Asset Management.

When asked about the value or percentage of similar purported profits that have been clawed back from investors, the liquidators from KPMG were unable to comment due to confidentiality reasons.

According to the judgment released on Feb 21, Envy Asset Management purported to purchase quantities of London Metal Exchange (LME) Nickel Grade Metal from Australian company Poseidon Nickel from January 2016 to around April 2020.

The purchases were purported to be made at a 16 per cent to 25 per cent discount to the average of the LME Nickel official daily cash settlement prices for the month prior to the month of scheduled shipment. Envy Asset Management would then purport to sell the metal at a higher price to third-party buyers for a profit.

Investors would pay a principal amount to buy into one of the purported nickel trades of Envy Asset Management, with the prospect of earning a percentage of their principal amount and the profit made from the metal trading.

Envy Asset Management guaranteed that investors would get back approximately 85 per cent of their principal amount upon maturity of their investments. But the interim judicial managers of Envy Asset Management found that the purported nickel trading was non-existent, and that the documents that had been presented as proof of trading activity were forged.

Investors’ funds that had been invested with Envy Asset Management and another company in the group, Envy Global Trading, had instead gone to shareholder Ng Yu Zhi as well as paid as director fees to him and another individual. Some of these funds were also paid to employees as remuneration, as well as to investors as referral fees or fictitious profits.

All these payments were made without any proper or legitimate basis because the purported nickel trading was non-existent. The Envy companies did not engage in any other meaningful business either, the liquidators found.

CH Biovest invested $5.5 million with Envy Asset Management for eight months to February 2020 and received $7.8 million in return, making a profit of $2.3 million.

CH Biovest said it is a bona fide investor who had believed that Envy Asset Management was conducting a legitimate business. The impression was reinforced when Envy Asset Management performed the know-your-client checks, prompting CH Biovest to believe that it was a safe and trustworthy investment environment.

But Justice Goh Yihan noted that Envy Asset Management had perpetrated fraud. There was no investment to speak of and thus the purported nickel held by it could not have appreciated in value.

He said: “There was actual fraud because a Ponzi scheme operator must know that the scheme will eventually collapse, and there is no legitimate purpose in the operation of the scheme other than to defraud investors.”

David Chan of Shook Lin & Bok represented the liquidators while Aldgate Chambers acted for CH Biovest. There were several lawyers holding watching briefs for other Envy investors and former employees who are not parties to this application. THE BUSINESS TIMES