Hong Kong Regulator Seeks to Disqualify Andrew Lo; Takes Legal Action Against LET Group

October 1, 2024 Macau Crime & Legal

Hong Kong stock market regulator, the Securities and Futures Commission (SFC), announced on Friday that it has initiated legal proceedings against LET Group Holdings Ltd and Summit Ascent Holdings Ltd. The move aims to seek a share repurchase order to protect the interests of independent minority shareholders in both companies.

The lawsuit has been filed in Hong Kong’s Court of First Instance due to alleged misconduct by Mr. Andrew Lo Kai Bong, who serves as chairman, executive director, and controlling shareholder of both companies. The SFC’s statement indicated that the proposed share repurchase order would compel Lo, LET, and/or Summit Ascent to offer to purchase shares from the minority shareholders, independent of Lo, at a price and manner determined by the court.

In addition to the share repurchase order, the SFC is also seeking a disqualification order against Lo for his alleged misconduct towards the shareholders of LET and Summit Ascent. This legal action comes amid ongoing concerns about governance and compliance within these companies.

LET Group is known for its investments in casino projects and holds a controlling interest in Summit Ascent, which operates the Tigre de Cristal casino resort located near Vladivostok, Russia. However, both LET Group and Summit Ascent have faced significant regulatory challenges, including non-compliance with Hong Kong bourse rules since January. This situation escalated following a mass exodus of directors after an initial attempt to dispose of the entity that holds the gaming license for Tigre de Cristal.

The shares of LET Group and Summit Ascent have been suspended from trading on the Hong Kong Stock Exchange since January 11. This trading halt reflects the serious concerns surrounding the companies’ governance and financial health.

Earlier in February, the SFC confirmed it was investigating LET Group and Summit Ascent for a potential breach of market rules related to an attempted sale of their Russian operations. The regulator noted that a previously announced sale agreement was executed without the required approval from shareholders, leading to its termination.

In its Friday statement, the SFC highlighted that Mr. Lo’s alleged misconduct had directly resulted in the trading suspension of shares for both companies. The regulator expressed concern over the uncertainty surrounding when trading might resume, indicating that the proposed share repurchase order would offer a potential exit strategy for independent minority shareholders.

The investigation revealed that Mr. Lo had “deliberately disregarded” applicable listing rules and requirements outlined in the Code on Takeovers and Mergers. This was particularly evident in early 2024 when agreements to dispose of assets in Russia were announced. Although this planned asset disposal was later canceled, the SFC alleges that Mr. Lo failed to disclose relevant material information to LET and Summit Ascent, did not exercise reasonable skill and care in fulfilling his duties, and neglected to ensure compliance with the Listing Rules and the Takeovers Code.

In a separate development, shareholders of LET Group approved a proposal in August to divest the group’s investment in the Tigre de Cristal casino resort. This decision reflects ongoing efforts to stabilize the company amid legal and regulatory scrutiny.

LET Group is currently pursuing the development of a casino resort project in Manila, Philippines, through one of its subsidiaries. This new venue is scheduled to commence operations in the first quarter of 2025, signaling the company’s ambition to expand its footprint in the Asian gaming market.