A top Next Digital executive has accused the Hong Kong government of “destroying” the free market after police arrested 15 people for allegedly manipulating the share price of the Apple Daily publisher. Its shares rocketed last month following owner Jimmy Lai’s arrest under the national security law.

Police said 14 men and one woman – aged 22 to 53 – were taken into custody on Thursday on suspicion of conspiracy to commit fraud and money laundering. The arrests were linked to what officers described as “extremely unusual fluctuations” in the share price of Next Digital from August 10 to 12.

Chow Cheung-yau Chung Wing-man
Chow Cheung-yau (left) and Chung Wing-man (right). Photo: RTHK screenshot.

Last month, shares of the media group soared over 1,000 per cent from HK$0.09 to HK$1.96 as investors made purchases in protest of Lai’s arrest for allegedly colluding with foreign forces, as well as the police raid of the Apple Daily newsroom. Pro-Beijing media later cried foul, saying it was “suspicious” that the media tycoon’s arrest – which their anonymous sources deemed would impact investor confidence – had led to a price jump rather than a plunge.

Chung Wing-man, chief superintendent of the Narcotics Bureau, said the arrested individuals – including a civil servant and a person with triad connections – had coordinated through a social media group to make “highly frequent” transactions, creating a “fake transaction volume” to boost the turnover.

“They manipulated comments on social media to lure individual investors into the game, and sold their shares at a high price to make profits,” she said.

Apple Daily
The front page and pages inside Apple Daily’s edition on August 11, 2020. Photo: Kelly Ho/HKFP.

Superintendent of Financial Investigation of the Narcotics Bureau Chow Cheung-yau said police observed that people involved in the case had bought and sold their shares at the same price, and made further purchases at a higher price before their transaction instruction was completed.

According to police, the 15 suspects had bought and sold the Next Digital stock 13,200 times during the three-day period, accounting for 23.8 per cent of the entire market actives. They gained more than HK$37.8 million from the transactions.

Chung said the force had “serious doubts” on the financial resources of the arrested persons, as six of them were unemployed while five were under the age of 30: “We are going to find out where the money came from and where will the money go.”

Next Digital stock
The changes in stock price of Next Digital Limited from July 14, 2020 to August 13, 2020. Photo: HKEX screenshot.

The narcotics unit chief superintendent said she would not speculate on why people invested in Lai’s stocks, but said an aged investor had lost over HK$1 million as the share price rallied then dipped back.

Chung added the arrests were not targeted at the pro-democracy media group: “We are only targeting at criminals who manipulated the Next Digital incident to scam others, making investors suffer.”

Mark Simon, a senior executive at Next Digital and Lai’s close aide, told HKFP no shares were traded by or on behalf of the media mogul and other people from the company, who were detained by police on August 10. He criticised the arrests on Thursday as disrupting Hong Kong’s free market.

“I am convinced that [Chief Executive] Carrie Lam and her minders from Beijing have a meeting every Tuesday morning called, ‘Destroying free markets and prosperity’,” Simon said.

Both Simon and David Webb, an activist investor, said it was “unusual” that police, rather than the Securities and Futures Commission (SFC), had led the alleged market manipulation probe.

Next Digital building
Apple Daily’s office in Tseung Kwan O. Photo: Kelly Ho/HKFP

“[Police] will need to show some form of coordination between those who were advocating buying the shares and those who were actually cashing out. Even then, nobody had to buy the shares if they didn’t want to,” said Webb, who holds over 7 per cent of the Hong Kong Economic Times Holdings Ltd, a competitor of Next Digital.

Webb added that based on his understanding, people who advocated for the buying of Lai’s stock did not claim to have special information about the company.

Police said they were still at an early stage in their investigation, and would not rule out the possibility of multiple offences. Other law enforcement agencies may conduct parallel investigations but police would not comment on whether the SFC had begun looking into the case, Chung said.

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Kelly Ho has an interest in local politics, education and sports. She formerly worked at South China Morning Post Young Post, where she specialised in reporting on issues related to Hong Kong youth. She has a bachelor's degree in Journalism from the University of Hong Kong, with a second major in Politics and Public Administration.