SFC commences proceedings against Greencool’s former chairman and seeks to freeze $1.59 billion of his assets to compensate investors

23 Jun 2014

The Securities and Futures Commission (SFC) has instituted proceedings in both the Court of First Instance (CFI) and the Market Misconduct Tribunal (MMT) against former chairman and chief executive officer, Mr Gu Chujun, and other senior executives of Greencool Technology Holdings Limited (Greencool), alleging market misconduct involving grossly overstating the company’s financial accounts for the years ended 31 December 2000 to 2004 (Note 1).

The commencement of these proceedings simultaneously in the CFI and the MMT follows seven years of investigation work across several jurisdictions, making it the SFC’s most complex investigation during this period.

The proceedings before the CFI have been commenced under section 213 of the Securities and Futures Ordinance against Gu, seeking, among other things, an injunction to freeze assets beneficially owned by Gu up to the value of about $1.59 billion and an order for damages to compensate more than 1,300 minority shareholders.

The SFC is alleging that Gu directed the massive fraud and should be ordered to compensate the minority shareholders who were induced to acquire Greencool shares on the strength of the distorted financial results (Note 2).

In the MMT proceedings, the SFC alleges Gu and eight other former senior executives of Greencool, namely, Mr Zhang Xihan, Mr Hu Xiaohui, Mr Liu Congmeng, Mr Xu Wanping, Mr Chen Changbei, Mr Fan Jiayan and Ms Margaret Man, and its former company secretary, Mr Henry Mok Wing Kai, were involved in gross overstatements of Greencool’s sales, profit, trade receivables, bank deposits, overstating Greencool’s net asset value and severely understating its bank loans, in annual reports and results announcements released between 2001 and 2005 (Notes 3 & 4).

The SFC alleges that as a result of the overstatement of bank deposits and the non-disclosure of the bank loans, the net asset value of Greencool for the financial years ended 31 December 2000 to 2004 was overstated by approximately RMB487 million, RMB653 million, RMB982 million, RMB1,062 million and RMB904 million respectively which represents 43% to 80% of Greencool’s total net assets in these years.

The SFC has identified assets in Hong Kong, namely shares in other Hong Kong listed companies, which the SFC alleges are held for the benefit of Gu by nominees (Note 5).

The SFC is seeking interim orders freezing these shares for the purposes of facilitating compensation orders, if such orders are made by the CFI in the section 213 proceedings. The amount that the SFC is seeking to freeze, up to $1.59 billion, is:



  1. Greencool was listed on the Growth Enterprise Market (GEM) of The Stock Exchange of Hong Kong Limited (SEHK) on 13 July 2000. On 1 August 2005, trading in Greencool shares was suspended and Greencool was subsequently delisted on 18 May 2007. On 5 March 2010, Greencool was struck off the register of non-Hong Kong companies by the Registrar of Companies of Hong Kong.
  2. None of these minority shareholders have been able to realise their investments which have since 18 May 2007 become valueless when Greencool was delisted from the GEM of the SEHK.
  3. The SFC alleges that the nine senior executives of Greencool have contravened section 277 of the Securities and Futures Ordinance which prohibits the distribution of materially false or misleading information that is likely to induce another person to subscribe for or buy securities or is likely to have a price effect on the company’s securities.
  4. The Notice to the MMT which contains the statement setting out the grounds for commencing the MMT proceedings will be available on the MMT website (www.mmt.gov.hk).
  5. The SFC alleges a parcel of more than 100 million H shares in Hisense Kelon Electrical Holdings Limited (formerly Guangdong Kelon Electrical Holdings Limited) (Hisense Kelon), a company formerly associated with Gu, are held secretly for the benefit of Gu. These shares are currently frozen by another interim order of the CFI in an application by Hisense Kelon based on the company’s ongoing investigation into the beneficial ownership of these shares.

Page last updated : 23 Jun 2014