A 26-year-old Hong Kong trader embezzled 50 million in public funds, went on a frenzied spree trading the “long on Hailice ETF,” and suffered a massive loss of 150 million before being arrested and detained by police.

A shocking case of massive fund embezzlement has broken out in Hong Kong’s financial circles! According to a report by Tencent News, a 26-year-old trader employed by Zhongfu Management Services Co., Ltd. in the Central financial district of Hong Kong unlawfully and without authorization diverted company funds of HK$50 million, and then went on a frenzy of leveraged buying of the 2x leveraged bull ETF on Hailisi through margin financing. However, he subsequently ran into a sharp pullback in the semiconductor sector, resulting in the company’s book loss reaching as much as HK$150 million within just a few months. The trader has been arrested by the Hong Kong police on suspicion of “theft.”
(Background: The Hailisi ADR premium has widened to 34.8%! Two whale investors bet on a pullback, with a paper loss of $350k USD)
(Additional background: South Korean stocks deliver a revenge rally! KOSPI surges nearly 8% intraday to touch 7,400 points, SK Hailisi jumps 12% toward a trading halt)

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• Diverted HK$50 million plus double leverage, a gamble on a semiconductor ETF
• The ETF crashes more than 72%; losses that may not be liquidated could expand further
• The group rushes to issue a statement to sever ties, prompting clients to withdraw funds for risk hedging

As an international financial hub, Hong Kong’s tightly run internal risk-control mechanisms have recently been easily torn apart by an insider. On July 26, Taipei time, according to a report from Tencent News’ “Yixian” column, a female director at a securities firm located at No. 19 Des Voeux Road Central, Global Building, Hong Kong filed a police report on July 20, exposing a shocking case involving the misappropriation of a large amount of funds and a high-leverage stock-trading blowup.

Diverted HK$50 million with double leverage, a big bet on a semiconductor ETF

The person involved in the case is a 26-year-old male trader who worked for Zhongfu Management Services Co., Ltd. (Chief Wealth Investment Limited). The report said that between January 9 and July 20 this year, the trader, without permission from the company, unilaterally diverted as much as HK$50 million in funds as margin.

What’s even more outrageous is that the trader not only diverted public funds, but also obtained margin financing through relevant institutions, and fully concentrated the funds to buy leveraged derivatives listed on the Hong Kong Stock Exchange—“Southern East Ying 2x Bull Hailisi ETF” (code: 07709.HK). Hong Kong financial professionals analyzed that it was precisely the compounding effect of “margin financing” and the “2x bull ETF on Hailisi” dual leverage that leveraged the principal of these HK$50 million into purchasing power of several hundred million Hong Kong dollars, ultimately evolving into a disastrous loss as high as HK$150 million.

The ETF crashes more than 72%; losses may further expand if not force-liquidated

Public market data shows that benefiting from the chip-storage concept boom, the price of this 2x bull Hailisi ETF had surged all the way to a historic high of HK$193.65 per share by the end of June this year. However, as the global semiconductor sector recently suffered a sharp pullback, as of July 20 before the incident, the ETF’s price had already plummeted to HK$52.58, with a decline over the period of more than 72%.

This shocking misappropriation case was only uncovered after Zhongfu Management recently conducted internal audits and account checks. At present, the suspect has been arrested by police on suspicion of “theft.” The police disclosed that because the above stock positions had not yet been force-liquidated and sold off, this means the company’s final actual losses could still further increase as the share price fluctuates.

The group rushes to issue a statement to sever ties, prompting clients to withdraw funds for risk hedging

After the incident broke out, it drew intense attention from Hong Kong’s financial community. According to Hong Kong’s Ming Pao, the wealth management company where the staff member worked is not a licensed company under the Securities and Futures Commission of Hong Kong; it is only a wealth management investment institution. However, it is affiliated with the Zhongfu Group, which has some licensed business operations. The group’s licensed entity, “Zhongfu Securities,” then urgently issued a statement distancing itself, stressing that the personnel involved are not employees of the brokerage, and that Zhongfu Securities has nothing to do with this incident.

However, Tencent News also pointed out that despite the official clarifications, out of deep concern regarding the group’s overall risk-control capability, some Zhongfu Securities clients have already started taking risk-hedging withdrawal actions. This incident not only highlights major gaps in how financial institutions supervise personnel and control fund authority, but also sounds a harsh warning for investors who blindly overtrust leveraged trading.