HK-listed firm linked to UK fraud, money laundering inquiry
The founders of the UK-based Chinese fast food takeaway chain Hotcha, that has been connected to a US$45 million tax fraud and money laundering investigation, are both significant shareholders in Wan Cheng, whose stock rose almost 600% in four months after listing in Hong Kong in July
Two directors from a China-based company that recently listed on the Hong Kong Stock Exchange have been linked to a US$45 million tax fraud and money laundering inquiry in the UK.
The pair, James Liang Jian-heng and Andy Chan Kit-lung, are both executive directors and significant shareholders of Wan Cheng Metal Packaging Company Limited (Wan Cheng), a company that states its primary business as the manufacture of tin cans for Guangdong province-based paint and coating manufacturers. Wan Cheng listed on the Hong Kong Stock Exchange’s Growth Enterprise Market in July, 2017, with the share code 8291.
Liang and Chan, who are both 36 years old, are also the founders of the UK-based Chinese fast food takeaway chain Hotcha. After launching in 2012 and showing strong initial growth, Hotcha entered into insolvency on October 18th, 2017. This came after numerous reports in the UK press linking Hotcha to a series of dawn raids on October 6th, 2017 by Her Majesty’s Revenue and Customs (HMRC), the UK government department primarily responsible for the collection of taxes but also possessing a wide-ranging investigation and arrest remit in relation to fiscal crimes, including money laundering.
According to the news reports, 80 HMRC officials searched three private properties and 12 business addresses in the west of England. Ten people were arrested and released under investigation. Hotcha ceased trading soon afterwards and, since entering insolvency, its 145 staff have had their contracts terminated and the company’s assets – which included a portfolio of leasehold properties, commercial catering and office equipment, and intellectual property (including websites and trademarks) – were put up for sale.
The Hotcha business had, in its first five years of operation, seemingly been a success. In 2013, Liang won a UK “entrepreneur of the year” award and in 2016 he was included in the Debrett’s 500 list, which “recognises Britain’s 500 most influential people.” Also in 2016, the business was listed in a Sunday Times “Fast Track 100” list of the fastest growing UK companies. In the same year, Hotcha managed to secure US$10 million in venture capital investment.
Hotcha’s aim was to capitalize on the success of the thousands of Mom and Pop Chinese takeaways that are a longstanding feature of the UK’s fast food scene by launching a similar type of business but as a nationwide brand. Liang claimed he had spent three years consulting with Chinese takeaway owners to “take apart every component” of the sector so he could develop a scalable model. Inherent issues, he said, centered around the high cost of skilled Chinese chefs and the fact that existing takeaway owners do not want their offspring to take over the family business, instead preferring them to pursue academic or professional qualifications.
Hotcha thought it had solved these issues by establishing a central kitchen where sauces and base ingredients would be prepared in bulk by “wok masters.” The company’s head office facility in the western English city of Bristol – which was part of the administrator’s sale in early November – also contained a central kitchen with the capacity to supply 75 outlets. From here, Hotcha rolled out a business plan that involved slick branding and marketing and an ambitious target of 100 nationwide outlets in five years.
The stated aim of the business was to become “the Domino’s of Chinese food” and although it soon fell behind its launch targets – when Hotcha ceased trading and entered insolvency, it had just opened its 13th store – the company’s early track record did seem to indicate a strong and viable concern.
The Hong Kong Stock Exchange told Asia Times it would not speak about individual companies but said there are statutory ‘obligations on listed issuers and their directors to disclose inside information as soon as reasonably practicable’
Liang hails from mainland China and Chan from Hong Kong and both were schooled in the UK. The pair met when they studied chemistry at university in London. British Companies House data shows they attempted to launch a cosmetics-based business in the UK before Hotcha, and this appears to link to a similar business set up by Liang’s family in China.
The Wan Cheng Metal Packaging Company business also has family links and was founded by James Liang’s father, Liang Junqian, in the Pearl River Delta port of Foshan, in 1997.
The listed entity was incorporated in the Cayman Islands in 2016 using the services of Appleby, an offshore law firm that has recently been in the global media spotlight after millions of its documents were disclosed in the Paradise Papers leak.
When Wan Cheng listed, Andy Chan was the entity’s Executive Director and Compliance Officer and James Liang its Chairman and Executive Director. Liang resigned the chairmanship in early November, however, and it was passed to his father.
When asked for comment, the Hong Kong Stock Exchange told Asia Times it would not speak about individual companies but said there are statutory “obligations on listed issuers and their directors to disclose inside information as soon as reasonably practicable.”
The UK’s HMRC would “make no connection to any individual business or taxpayer” and only referred Asia Times to a press release confirming that “seven men and three women have been arrested as part of an ongoing investigation by HMRC into a suspected £35 million pound tax fraud and money laundering.”
The opening price for Wan Cheng Metal Packaging Company Limited on the Hong Kong Stock Exchange’s Growth Enterprise Market, in July, 2017, was HK$0.65. After listing, the share price witnessed three months of gradual growth. At the end of October, however, it started to increase sharply – and by the third week of November was hovering around the HK$4.5 mark, meaning it had risen almost 600% since the listing.
Neither Hotcha nor Wan Cheng Metal responded to Asia Times requests for comment.