Four persons, charged by the ICAC, were today (Wednesday) sentenced to various jail terms at the District Court for their respective roles in fraudulent trading of derivative warrants and dealing with over $103 million in crime proceeds.

An operator (D1) of an investment company (Company A), 42, received a total imprisonment of four years. A staff member (D2) of Company A, 35, was jailed for two years; while D1's associate (D3), 30, was sentenced to 28 months' imprisonment.

Another co-defendant (D4), 41, wife of D1, was sentenced to three years' imprisonment.

In sentencing, Judge Douglas Yau Tak-hong said the case involved a sophisticated scheme with a cross-boundary element and a large scale of operation, which had taken the ICAC a long time to investigate. He said custodial sentences had to be meted out to serve as a deterrent.

D1 was found guilty of four counts of conspiracy to defraud, and one of doing an act tending and with intent to pervert the course of public justice, contrary to Common Law; while D2 was convicted of one count of conspiracy to defraud. D3 earlier pleaded guilty to three counts of conspiracy to defraud.

D4 was found guilty of 17 counts of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to Section 25(1) of the Organised and Serious Crimes Ordinance (OSCO).

The case arose from a corruption complaint in relation to the trading of derivative warrants. Subsequent ICAC enquiries revealed the above conspiracy and OSCO offences.

The court heard that at the time of the offences, the case involved four derivative warrant issuers and four Liquidity Providers (LPs) appointed by them.

The LPs have a function of providing liquidity of derivative warrants in the market by continuously quoting to investors bid and ask prices to ensure that there is a source of derivative warrants for trading.

The court heard that between September 2005 and May 2008, D1, D2 and D3 conspired with other persons to defraud the above LPs, and such companies, firms and persons as might be induced to trade in tens of derivative warrants issued by the four issuers concerned.

To materialise their scam, D1 set up various bases in Hong Kong and on the Mainland.

D1, D2 and D3 conspired to create a false or misleading appearance of active trading in the afore-mentioned derivative warrants daily through a number of dummy accounts operated by people associated with D1 from those bases.

The trio dishonestly caused traders based in Hong Kong of four other companies respectively associated with the derivative warrants issuers to render favourable prices to be quoted to people connected with D1 for the said derivative warrants.

Under this scam, secret profits were also alleged to have been offered to the said traders as their rewards for doing so.

The court also heard that D1 had approached an immunised witness and asked him not to co-operate with the ICAC and to give false and misleading information.

The court also heard that between May 2005 and July 2008, D4 had dealt with over $103.8 million in crime proceeds obtained from the above fraudulent trading of derivative warrants.

Out of the crime proceeds, over $34.6 million was recovered from D4's safe deposit box at a bank, while the remaining $69.2 million was deposited into her personal accounts, joint accounts with other family members, as well as accounts of four companies at six banks, the court was told.

The Securities and Futures Commission has rendered full assistance in the ICAC's investigation.

The prosecution was today represented by prosecuting counsel Joseph Tse, SC, assisted by ICAC officers Kevin Cho and Ada Lau.