The Hong Kong Securities and Futures Commission has commenced proceedings against 11 defendants seeking the appointment of administrators and injunction orders over a group of companies
The Hong Kong Securities and Futures Commission has commenced proceedings against 11 defendants seeking the appointment of administrators and injunction orders over a group of companies and individuals related to a private hedge fund, the Descartes Athena Fund SPC.
Following an urgent application in the High Court by the SFC on Monday, the court appointed John Robert Lees and Colum Sebastian Joseph Bancroft as joint and several interim administrators of four companies: Descartes Investment Management, Descartes Global Asset Management, Descartes Finance and Descartes Athena Fund SPC.
The court also granted an injunction order to freeze assets of up to USD90.6m in relation to two individuals and companies related to and/or operated by them. In the case of one of these defendants, the injunction extends to his assets worldwide. The SFC is conducting further inquiries to identify these assets.
The SFC is not naming the individual defendants at this stage because they have not been served with the court orders. They are currently not in Hong Kong.
The court also granted an order to freeze up to HKD160.89m which was transferred from Descartes Global Asset Management to a third party company. Most of these assets have been identified and located in Hong Kong and are now held under the terms of the orders obtained by the SFC.
The SFC’s urgent action was prompted by concerns that client monies were at risk of dissipation.
The SFC alleges that the Athena Fund is a segregated portfolio company incorporated in the Cayman Islands and that Descartes Investment Management had been appointed to act as its investment manager. Descartes Investment Management, in turn, delegated all functions and powers to Descartes Global Asset Management, which was the investment adviser of the Athena Fund.
At this stage, the SFC suspects the Athena Fund had raised approximately USDD104.9m from 313 investors in subscriptions. Most of the clients are based in Taiwan.
The SFC is concerned because it appears the operators of the Athena Fund purported to liquidate the Athena Fund in July 2008 when pressed by clients for redemptions and used what appear to be false documents from a major accounting firm. In addition, false statements of account and subscription contracts purportedly issued by the fund administrators were sent to investors.
The interim administrators will take possession of the companies’ records and bank accounts, account for and segregate the assets of each of the companies, recover money illegally transferred from the Athena Fund and report, as required, to the court.
The SFC’s investigation is continuing. The case will return to court on 19 May 2009.
