[SINGAPORE] Well-known venture capitalist Finian Tan told the High Court on Tuesday (Apr 8) that he was red-faced by the loss to alleged fraudster Ng Yu Zhi.
“I am embarrassed by this loss. If you ever lose in this way, it’s not something you would be proud of or want to repeat,” said Dr Tan on the stand for the third day in Ng’s trial.
He had earlier commented that the worst loss was the one due to fraud.
The 37-year-old allegedly did so by claiming that his company Envy Global Trading (EGT) was buying nickel at a discount and selling the metal for a profit. But the prosecution contends that no nickel was actually bought or sold – earlier investors were paid with money put in by other investors.
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Ng is accused of duping Dr Tan by getting him to deliver US$19.2 million between October 2020 and January 2021 to EGT.
The bulk of the sum came from Dr Tan – US$14 million was from holding company Vickers Financial Group, of which he is the majority shareholder, and another US$1.5 million was his personal money.
Ng is also accused of cheating a company named FinComm, which used money from two of Vickers’ funds to invest in the nickel scheme. FinComm delivered US$14.1 million to EGT between December 2020 and January 2021.
These funds were purportedly used to help finance the nickel purchases before the buyers paid up.
“We had a rough 2021. Investors were very concerned… whether we did proper due diligence, do we have the mandate to invest… We had to hire external consultants to check on our processes. It was a very trying year.”
He said the incident affected the reputation of Vickers, but fortunately no fundraising took place at that time.
While the funds that invested about US$14.1 million in Ng’s purported nickel business had to write down this amount, the Vickers funds collectively had a record year. But the performance would have been even better had Vickers not written off this purported investment.
His subordinate Luo Wei, the prosecution’s witness who took the stand after Dr Tan, testified that his investment team had assessed the risk of the Vickers funds investing in Ng’s nickel business to be “low”.
Luo, assistant managing director of Vickers Venture Partners, said that they came to that conclusion after having evaluated the risks of the deal, including credit risk, liquidity risk and on-spec risk (which refers to whether the nickel quality meets specifications).
The investment memo was presented to Vickers’ investment committee, which allowed the two funds to invest in Ng’s nickel business in late December 2020.
But Nicholas Narayanan, Ng’s lawyer, said that the witness had not done the due diligence “with the usual vigour you would do for other investments” for the funds’ investment into Ng’s business. He pointed out that Luo did not press Ng for EGT’s latest financial statements when Ng did not provide them as requested.
“Incorrect, I have done more,” responded Luo, noting that some companies do not have their latest financial statements.
The witness, who has been with Vickers since 2016, said that his team had done the same level of due diligence, if not more, for the funds’ investment in the nickel business.
As part of the due diligence for investment opportunities, Luo’s team would generally check out the entrepreneurs and their businesses.
Dr Tan formally and informally assessed Ng to see whether he was capable, and whether what Ng said was true, Luo said, without elaborating on what the assessments entailed.
Luo checked the nickel market and performed other aspects of due diligence, including asking external legal counsel to enquire around, as well as requesting the counsel to review the contracts that he obtained from Ng for their enforceability.
He was one of the associates that invested through Dr Tan; his US$400,000 was part of the US$19.2 million that Ng allegedly cheated Dr Tan of.
A liquidator of EGT will take the stand on Wednesday.
