Convoy announced in a press release on 19 December it has commenced proceedings in the Hong Kong High Court.The firm claims the 28 individuals were involved in gross breaches of fiduciary duties and illegitimate diversions of the company’s funds, which caused substantial financial loss and damage to the company.

The key defendant identified in the announcement is former Convoy director Roy Cho Kwai Chee, known to Hong Kong shareholders as Doctor Cho as he is also a general practitioner.

According to a writ filed by Convoy, and seen by newspaper the South China Morning Post, the firm alleges Cho was the mastermind behind a “wrongful circular financing agreement” that diverted HK$4.043bn ($520m, €439m, £387m) of Convoy’s clients’ money into other companies Cho had a stake in.

“To the best knowledge of the plaintiffs, Roy Cho has fled Hong Kong,” the writ said according to the Post.

Convoy is also suing former directors it says were connected to Cho and his network of businesses, including former chairman Quincy Wong Lee-Man, former vice-chairman Rosetta Fong Sut-sum, former director Christie Chan Lai-yee and former chief executive Mark Mak Kwong-yiu.

All four senior executives were arrested by anti-graft officers on the 7th and 8th of December on charges of alleged corruption.

The other defendants Convoy is bringing claims against have not been named by the firm.

Enigma network

The companies Cho diverted Convoy’s finances into are part of a group of 50 listed Hong Kong businesses involved in a web of cross-shareholdings, identified by activist investor David Webb on 15 May, which he named “the Enigma Network”.

Webb’s report says the companies involved in the network, including Convoy, approved loans and transactions between each other that made no commercial sense.

Many of the stocks identified by Webb suddenly fell on 27 June, some by as much as 90%.

Cho’s influence

According to the Post, Convoy’s writ alleges that while Cho was a shadow director he “gradually acquired ownership and control of Convoy since 2013 by appointing his associates, nominee and/or agents to occupy the various key positions in Convoy”, including Mak and Chan.

The writ says, in 2014, Cho and his associates induced potential investors to put money into Town Health International Medical Group.

Town Health, a clinic chain chaired by Cho, was suspended from trading by the SFC in November 2017 for giving misleading information.

Tsai’s lose millions

According to a report by Bloomberg, Convoy’s suit alleges that the prominent Taiwanese Tsai family invested HK$1.57bn for a stake in Convoy. This investment was then diverted into other companies in the Enigma Network by Cho’s associates for personal benefit.

The Tsai family controls Fubon Financial Holding Co, Taiwan’s second-largest bank by assets.

Restoring confidence

The lawsuits by Convoy follow its announcement on 17 December that the firm will spend HK$300m in 2018 to more than double its team of financial advisers and pay a bonus to retains staff and expand its business.

The firm said the spending was a move to restore the confidence of its investors and customers.

Convoy said in a statement it will also continue to investigate the issue and it has not rule out the possibility to file further claims against even more defendants in the future.

“The company will continue to work closely with a team of accounting and legal professionals to recover its rightful interests, including any funds diverted improperly,” Convoy said.

“It will also keep assisting the authorities in the related investigations,” they said.

Despite the moves, Convoy’s future remains uncertain as the firm’s shareholders plan to hold a meeting on 29 December where they will look to expel eight current directors.

Two of the shareholders believed to be disgruntled are Kwok Hiu-Kwan, who owns 29.91% of the company, and Fubon Financial who own 30%.

Additionally, Convoy’s shares were halted from trading on 7 December after their price fell by 7%, it is estimated the freeze has resulted in a HK$1bn loss for the firm.