The Hong Kong Official Receiver’s Office (ORO) has concluded its investigation into the allegations made by Mr. Ka Sek Wong (Jimmie Wong), the former CEO of Credit Intelligence (ASX: CI1), finding no evidence of material irregularity in the Company’s operations. This outcome follows a turbulent period for Credit Intelligence, marked by legal actions and complaints from its former CEO who resigned in December 2023 following demands from shareholders for his removal.
In the weeks following his departure from Credit Intelligence, a debt recovery firm he founded, Wong filed complaints with the Hong Kong authority regarding the administration of bankruptcy cases and initiated legal proceedings against the Company. However, the ORO’s investigation, which included audits and interviews with relevant parties, found no merit behind Wong’s claims.
The Board of Directors of Credit Intelligence welcomed the ORO’s findings, expressing satisfaction with the outcome of the investigation. The Company intends to provide updates on the adjourned creditors’ meetings and the nomination/appointment of trustees in due course.
The recent developments come after a series of legal actions initiated by Wong. On February 1, 2024, he filed a legal action against the company. In response, the ORO issued acknowledgement letters to Wong and others involved, signalling the commencement of investigations into the allegations.
The investigations involved audits of bankruptcy cases and discussions with relevant stakeholders. Pending the investigation’s outcome and with creditors’ consent, the ORO adjourned creditors’ meetings and withheld nominations for trustees, prolonging the process for cases assigned to Credit Intelligence.
Despite the ongoing investigation, Credit Intelligence’s subsidiary, Hong Kong Debt Management Services Limited (HKDMS), was awarded a new contract as provisional trustees. However, the Company acknowledged the potential impact on its revenue and operations, particularly if the investigation results in further delays or suspensions of its activities.
Financially, Credit Intelligence anticipates potential losses due to delays in case appointments and revenue recognition. However, they expect these losses to be offset by reduced expenditure following Wong’s resignation.
Amidst uncertainties surrounding the ongoing investigation, Credit Intelligence has requested a voluntary suspension from the ASX until the investigation’s conclusion. CI1 shares last traded on February 8, 2024, with shareholders (including Wong) having not been able to trade the shares since.
The outcome of the ORO investigation provides a glimmer of hope for Credit Intelligence and shareholders as it navigates through a challenging period that has included a major leadership overhaul and ongoing review of business operations.
For the Half Year ended 31 December 2023, Credit Intelligence reported $6.0 million revenue which represented a 28% decline on the previous corresponding period. A net loss of $11.1 million, however, was much more damaging for shareholders to be a 507% drop on the previous corresponding period’s $1.8m net loss.
The blowout was attributed to a $9.5 million impairment loss tied to failed BNPL and credit financing businesses that had been acquired or launched during Wong’s tenure which failed to generate expected returns.
Wong’s departure and ongoing stoush with the Company comes after Credit Intelligence undertook ambitious growth projects over the past few years, falling from its highs in 2020 when the Company reported $13.6 million revenue with a net profit after tax of $2.5 million.
CI1 share have subsequently fallen from their high of $1.18 in January 2021 to have last closed at $0.11.
Mitch Korver is a Business Writer focused on high-growth companies listed on the ASX in the small and medium cap space.
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