Investors to sue 11 renowned banks

A group of 30 millionaires plan to sue 11 foreign banks including ABN AMRO, DBS, HSBC, and Citibank in Beijing, claiming those banks cheated them into buying complex financial derivatives which led to losses of more than HK$1 billion ($129 million).

Lai Jianping, a partner of the Transking Law Office in Beijing and director of a so-called 'Victims Association of Discount Stock", told METRO yesterday there are 30 members in his association, including some living in Taiwan and Hong Kong.

"We had a total loss of HK$1 billion," he said.

Lai said the group filed lawsuit applications in 4 Beijing courts but were yet to receive a reply.

The group wants the bank to compensate their losses.

Members of the group were once considered wealthy in China, but they say that their personal assets shrank after buying "KODA" (Knock Out Discount Accumulator), a complicated derivative that investors get by signing a one-year contract with banks to buy an agreed amount of Hong Kong stocks at a fixed price.

Lai said he lost more than HK$21 million in 1 year, with an initial investment of HK$ 4 million.

DBS China issued a statement yesterday, saying the case was before the court and that DBS did not comment on ongoing cases.

The KODA product was only sold outside the mainland and the mainland operation has never sold or participated in sales of KODA products.

It also said DBS has been following regulations and will take legal action against any false reports.

Lai said if the KODA victims file a case in Hong Kong, they must pay millions of Hong Kong dollars in lawsuit fees because they are not residents, so they decided to sue the banks in a Beijing court, which is the cheaper option.

"We have almost gone bankrupt, and we cannot afford it," Lai said, "The only hope we have is placing the case in mainland courts."

Lai alleged that in June 2007, he met an investment advisor named Zhang Ning in ABN AMRO Bank's Hong Kong branch. Zhang allegedly promised "an investment return of no less than 20 percent" annually and asked Lai to sign an English contract.

"She repeatedly said that buying discount stock was more profitable and more rewarding for investors, but never ever mentioned its intrinsic risk," Lai alleged.

"It's a cheat!" he alleged.

Zhang Yin, professor at the University of International Business and Economics, said according to Hong Kong law, sales people should provide their clients with a clear risk warning of those high-risk financial products, and they could only sell this kind of product to professional investors.

"Actually, most victims cannot be called investors at all, as some of them had never bought stocks before," Lai added.

Lai said that according to contracts with the banks, the victims bought a certain amount of discount stock. When the stock price rose to an appointed level, for example, a 3 percent increase, the contract ended. But when the price sank, the foreign banks asked clients to put additional deposits in their account, or allegedly cleared their account by force.

ABN AMRO declined to comment yesterday.

Source: BizChina