Headquarters of China Ecotourism Group. Source: AGB

Hong Kong Stock Exchange Takes Action Against Chinese Lottery

The Hong Kong Stock Exchange (HKEX) has initiated legal proceedings against Chinese lottery operator China Ecotourism Group to address concerns over problematic lending practices and enhance governance among listed entities. Earlier, the exchange had extended a loan to support the restoration and expansion of the Chinese lottery.

Collaborating with the Securities and Futures Commission (SFC), HKEX's investigation unearthed evidence indicating that a portion of the loan funds had been diverted to individuals and entities associated with the lottery's top executives. Notably, funds earmarked for investment were redirected to the personal account of Chan Tan, the spouse of one of the company's managers, raising red flags for the exchange.

The investigation revealed deficiencies in due diligence, risk assessment, and credit evaluation procedures regarding loans and investments. These shortcomings exposed the company to significant financial risks, resulting in total losses amounting to HK$473.1 million. The directors' failure to implement adequate internal controls and risk management protocols endangered the interests of the lottery company's shareholders.

29 April 2024, 10:20

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