Compliance Updater - May 2024

A summary of key compliance stories from around the globe in May.

1. Former Binance CEO jailed for four months.
2. Insider dealing proceedings in Hong Kong against Segantii Capital Management.
3. FCA fines and bans former CEO of Shard Capital.
4. FCA’s “name and shame” plans raised at Parliamentary sub-committee.
5. Singapore oil trader found guilty of cheating HSBC and abetting forgery.
6. Carer and assistant to crypto supervillain sentenced to more than six years for money laundering.
7. Political heat for the FCA.
8. Former reality TV stars charged by FCA over “finfluencer” activity.
9. FCA and PRA fine Citi almost £62m over ineffective trading controls.

Former Binance CEO jailed for four months.

The former CEO of Binance, the world’s largest cryptocurrency exchange, was sentenced to four months in jail in the United States. Changpeng Zhao pleaded guilty to the charge of failing to establish adequate anti-money laundering controls.

Insider dealing proceedings in Hong Kong against Segantii Capital Management.

The hedge fund, Segantii Capital Management, is facing criminal proceedings in Hong Kong for insider dealing. Segantii specialises in block trades, and Hong Kong’s Securities and Futures Commission charges relate to dealing in a Hong Kong listed company, understood to be retail group Esprit, before a block trade in June 2017.

FCA fines and bans former CEO of Shard Capital.

The former CEO of brokerage Shard Capital, James Lewis, was fined £120,300 and banned by the UK Financial Conduct Authority (FCA) for providing incorrect information about clients’ cash balances. It appears that the information related to investment vehicles of the disgraced German financier Lars Windhorst.

FCA’s “name and shame” plans raised at Parliamentary sub-committee.

The FCA issued a consultation paper in February 2024 proposing to “name and shame” companies under investigation more frequently and at an earlier stage. The FCA’s aim – to create more transparency and increase deterrence – has been criticised as potentially harmful to competitiveness and running the risk of driving business abroad. The Chancellor Jeremy Hunt had already said he hoped the FCA would “relook at their decision”. At a Treasury sub-committee, Ashley Alder, chair of the FCA, expressed surprise at the strength of the criticism and made it clear that “no decision has been made”. Furthermore, he said there would be “no presumption to disclose or name” companies under investigation.

Singapore oil trader found guilty of cheating HSBC and abetting forgery.

Lim Oon Kuin, the founder of Hin Leong Trading, was found guilty of two charges of cheating HSBC and one of encouraging the forgery of a document. He will be sentenced in October. Two bogus transactions were created for the sale of oil worth some $117m, and the forged documents led HSBC to disburse millions of dollars in loans to Hin Leong. The firm had been hiding hundreds of millions in losses from oil futures and selling off inventory that had already been pledged as collateral for loans.

Carer and assistant to crypto supervillain sentenced to more than six years for money laundering.

Jian Wen, a China-born UK national, was sentenced to six years and eight months in prison for money laundering. The sentence related to laundering 150 bitcoins, worth about £7.5m, but Wen has also been linked to a much larger seizure of more than 61,000 bitcoins, worth around £2bn, at the time of the arrest. Wen had been taken on as a “carer and assistant” to a Chinese “supervillain” and “master of deception” Zhimin Qian (also known by her fake name of Yadi Zhang). Qian defrauded more than 128,000 people in China in a £5bn investment fraud that promised extravagant 300% returns. Qian converted her ill-gotten gains into bitcoin and absconded to the UK and is still on the run from UK and Chinese authorities. Wen pleaded that she was a largely ignorant facilitator to Qian, converting her bitcoin into more conventional assets including property, jewellery and pre-paid cards. The judge did not agree.

Political heat for the FCA.

As the UK moves closer to a general election, the FCA seems to be attracting a disproportionate share of the political heat. The incumbent Tory government is concerned that the FCA may be failing in its secondary objective on growth and competitiveness. The opposition is also emphasising that an incoming Labour government will work to “streamline the regulatory burden on financial services and tear down barriers to competitiveness and growth”.

Former reality TV stars charged by FCA over “finfluencer” activity.

The FCA brought charges against nine people – mostly from shows “Love Island” and “The Only Way Is Essex” – for promoting a foreign-exchange scheme linked to high-risk derivatives. It appears the influencers were paid to promote an Instagram account that provided advice on buying and selling contracts for difference (CFDs). The charges relate to issuing unauthorised financial promotions.

FCA and PRA fine Citi almost £62m over ineffective trading controls.

The FCA and PRA fined Citigroup a combined total of £61.7m for having ineffective controls over trading between 2018 and 2022. The most notable incident saw a trader, intending to sell a basket of shares valued at $58m, enter details to create a basket of $444bn. Some of the fat-fingered trade was blocked by Citi’s internal controls, but about $1.4bn of shares were sold before the trader managed to cancel the order.