Sh704m fake gold scam exposes Kenya’s weak laws on dirty cash

When Chui Bing Sun heard from his former partner Chien Hoe Yong last year after a 12-year silence, he was hugely elated by his business proposal. 

When Mr Yong, a Chinese businessman based in Hong Kong, and Sun, a Malaysian national, first met in 2006, they forged a business partnership that gave rise to Sun International Group Ltd, a company listed on the Hong Kong Stock Exchange.

Sun International also went by a host of other names, including ListCo, Galileo Holdings Ltd and Galileo Capital Group Ltd.

Chui resigned from the company in 2008 and is now a director of Checkmate Capital Limited, a firm based in Kwun Tong, Kowloon, China.

Yong also left and started his own company, Henco Management, which is said to deal in refining gold from the Democratic Republic of Congo (DRC) and reselling it for a huge profit.

And now documents filed in court in an ongoing case where Chui has sued Yong lay bare details of the fallout between the two erstwhile business partners over a multi-million-shilling fake gold scam.

According to court documents filed before Justice Said Chitembwe, Chui is seeking to recover Sh740 million he invested in a shadowy fake gold scam allegedly orchestrated by Yong.

The case also ropes in a host of local law firms and banks that were involved in the handling of the cash in what puts to the test the country’s privacy and financial disclosure laws. 

It comes at a time when the Financial Reporting Centre (FRC) has proposed a raft of changes to the Proceeds of Crime and Anti-Money Laundering Act to compel lawyers to report suspicious financial deals involving their clients.

The first bid was in 2019 when FRC sought to amend Sections 48 and 49 of the Finance Bill 2019 that would require advocates, notaries and other legal professionals to investigate their clients and report to investigative agencies.

Law Society of Kenya has opposed the proposal.

If Parliament passes the changes on Proceeds of Crime and Anti-Money Laundering Act, advocates will be required to keep cash records of transactions that are beyond Sh1 million and report suspicious dealings. 

Advocates will also be required to tell on property purchases, managing savings and shares accounts and operation of companies on behalf of their clients.

Chui says Yong roped him into the scheme that would see them procure gold from DRC through a Mr Elijah Murenzi Maliba, who claimed to be a relative of a top Congolese politician. 

According to Chui, Maliba, who claimed to own a gold mining company under the name Ngweshe Mining Company (NMC), asked for an initial $100 million (Sh11.3 billion) as capital for the venture.

At one of their meetings in March 2020, Yong claimed he had paid Maliba’s company $942,000 (Sh106 million) but was short of Sh19 million to facilitate the delivery of an initial 5kg gold bar to Hong Kong.

This is where Chui came in. He told the court that Yong asked him to loan him the money and since there was no security for the loan, he would become a partner in the gold export business, with the money acting as his initial investment.

The two agreed that Chui would be entitled to $1,800 (Sh203,758) for every kilo of gold shipped to Hong Kong. And to give the deal credence, Chui says Yong claimed he had other gold dealings in Cote D’ívoire, Tanzania and Sierra Leone.

He says he wired the Sh19 million loan to Yong’s Standard Chartered Bank account and later flew to Nairobi with a promise to return to Hong Kong with 105kg of gold from DRC in 10 days. 

From Chui’s account, Yong assured him Ngweshe was a family-owned business, with Maliba said to have inherited the company from his late father Elijah after he died in October 2019.

Chui says he came to learn that the alleged gold deal was a fraudulent scheme in November 2020 and that Maliba was indeed a Kenyan by the name Bruno Otieno Oliende.

By this time, he had put in Sh704 million into the scheme, which he is now seeking to recover.

Maliba’s Congolese passport was later confirmed to be fake by the DRC embassy in Nairobi.

He had also claimed to be CEO of another gold mining company by the name Bunia.co.ke.

Chui says in court documents that no gold was delivered, prompting him to sue.

The case puts to test the laws on privacy and financial disclosure, with Chui now demanding Yong’s bank reveal the transactions that followed after he had deposited the money in his account.

But Oliende has distanced himself from the deal, saying he never received any of the money allegedly paid to Yong.

“The applicant’s application is made in bad light, out of malice and hearsay and the same is calculated to mislead this court that I am an unscrupulous and dishonest businessman. If the plaintiff sent money to my account as alleged, allegations which are still contested, it is out of ignorance or reasons better known to him and thus cannot hold me liable,” said Oliende, adding that he never requested for financing and was not involved in the saga.

Oliende also distances himself from the fake passport and other documents used to lure Sun into the scheme.

“The plaintiffs lost their money in a manner alleged in their pleadings that is due to their ignorance and therefore it should not in any way subject me to continuous torture, suffering and humiliation,” he says in his reply to the claims.

Other defendants in the case are Yong’s firm Henco Management, Joseph Luganza, Global Freight Management, Brian Odhiambo and his law firm Odhiambo, Talam and Co-Advocates and Owese Alphonse Collins Odonyo through his law firm Odero Osiemo and Co Advocates. 

Others are Jonathan Okoth Opande, Kennedy Anyanga and Titus Kamau Ngunjiri Mwangi.

The law firms have been sued for receiving funds on behalf of their clients involved in the scheme.  

Odhiambo, Talam and Co-Advocates and Odero Osiemo Company Advocates have, however, distanced themselves from the saga, saying they were simply contracted to receive clients’ funds in an escrow account and disburse the same as instructed.

The law firms argue that Chui ought to have known whom he was dealing with before committing his money to the fraudulent deal.

They assert that they were never a part of discussions between Chui and Yong and the people he claims to have been involved in the saga.

Odhiambo, Talam and Co-Advocates argue that Yong was a walk-in client who sought legal services, and their role, in this case, was only to receive the money and pay it as instructed.

“The applicant’s firm was to receive some money from the first and second defendants and to disburse them as directed. This was a limited scope of services, and the defendants were not required to play any role in any transaction relating to the source of the funds nor were the applicants supposed to administer nor make follow up on the expenditure or usage of the funds paid on the instructions of the first defendants,” argued Brian Odhiambo, a managing partner at Odhiambo, Talam and Co-Advocates.

The law firms also claim that Chui has not come to court with clean hands as according to the account in court, he was also allegedly using proxies to carry out illegal gold trade.

“What is now emerging is that the plaintiffs were involved in an illegal gold business but through proxies to circumvent the laws of Kenya (legal requirements to obtain a licence or permit before trading in gold or other precious metals). They were, thus, in breach of trading in unwrought precious metals Act Cap 309 and mining Act Cap 306, laws of Kenya,” the firms say.

Chui, however, argues that the agreement between Odhiambo, Talam and Co-Advocates and Yong for the release of the money to Olinde, alias Maliba, was questionable.

In one instance, Chui claims that the law firm allegedly released Sh113 million in cash without any documentation supporting the transaction.

“It is highly questionable that the sixth defendant, as an advocate and running a law firm and subject to the Law Society of Kenya’s code of ethics and conduct for advocates, would receive such sums into the seventh defendant’s bank account without maintaining proper and appropriate documentation supporting the transfer of funds and only generates an escrow agreement after disbursing more than $5 million (Sh565 million) in cash,” he claims.