Why 'divorcing' couple could not hide their $12m from creditors

Judge says man's move to transfer all of his assets to ex-wife not immune from bankruptcy action

- Tan Ooi Boon

A businessman who was up to his neck in debt and facing ruin came up with what he thought was a crafty ploy file for divorce, willingly give his former wife all of his many millions of dollars worth of assets, and so keep the creditors off his back.

Like many such ploys devised under the heat of financial pressure, the eyebrow-raising stunt only succeeded in arousing the suspicion of the official handling the bankruptcy. He promptly applied for a worldwide injunction to freeze the ex-wife's assets, which included four condominium units worth over $12 million, so that the money could be used to pay off creditors.

The move was necessary because there was a high risk that the money would be dissipated, given that three of the condo units had already been sold, with the ex-wife allegedly stashing $3 million of the proceeds in cash at home.

The case had all the elements of a TV drama because the couple - Mr Li Hua and his wife Xia Zheng were accused of using their companies, Sunmax and SMGC, to run a fraudulent scheme to obtain over $65 million from investors.

This was done under the guise of Sunmax appointing SMGC as an investment manager to earn substantial fees for its services. Between 2009 and 2017, Sunmax paid over $14 million to SMGC as fees for its services, with around $8 million of this going to the couple as "directors' fees and dividends".

In 2016, Sunmax began telling investors that it was facing substantial losses, even though some investors had signed agreements stating that their capital sums would be protected. Disgruntled investors began suing Mr Li, prompting him to start transferring assets to his then wife.