Introduction
The Securities and Futures Commission (“SFC”) recently reported two disciplinary actions, i.e. Securities And Futures Commission v DFDR Enterprises LLC and Others [2022] HKCU 2092 (the “DFDR Case”) and Securities and Futures Commission v Maxim Capital Ltd and Another [2022] HKCU 2621 (the “Maxim Case”), both of which show how the SFC tackled securities fraud.
The two cases share a lot in common in that both operate deceitful, if not false, investment traps. The DFDR Case is one of the typical global[1] “Pyramid and Ponzi Scheme” in which the fraudster purports to operate a business or an investment which promises high returns to victims with little or no risk at a later pay date and victims are persuaded to recruit other people to participate in the business or the investment. Whereas, the Maxim Case can be categorized as the “Boiler Room Fraud” where a bogus stockbroker cold-calls investors and forces or persuades them into buying worthless shares.
No matter what these securities frauds are called, it can be observed that they are swiftly dealt with by the SFC, primarilyresorting to legal weaponry available under sections 109, 114 and 213 of the Securities and Futures Ordinance (Cap 571 of the Laws of Hong Kong) (the “SFO”).
Brief facts
In the DFDR Case, from about October 2014, DFDR Enterprises LLC and DFDR Enterprises, LLC (“DFDR”), and its founder and associates, represented to the outside world that DFDR operated gold mines…
