John Lee, Hong Kong’s Secretary for Security, threatened to imprison the bankers of Apple Daily founder Jimmy Lai for any dealings with his accounts, Reuters reported on Thursday.
In letters to Lai and local branches of HSBC and Citibank, viewed by Reuters, Lee warned that any transaction could result in up to seven years of jail time. They include disposal or conversion, using them as collateral or transferring them in or out of Hong Kong.
The letters were sent this month, after authorities invoked the national security law to freeze nearly HK$500 million (US$64 million) in assets belonging to Lai, including his shares in Next Digital and funds in local bank accounts of three companies owned by him.
A Hong Kong-based spokesperson for Citibank noted that the bank is required to comply with all applicable laws, while a spokesperson at HSBC in Hong Kong refused to comment.
Citing a financial advisor of Lai, the article reported that the funds “represented the Hong Kong management end of a global network of banking relationships covering his private wealth.” The advisors are also seeking ways to challenge the freeze.
Extending the national security law crackdown to elite tiers of the banking and financial sector, the unprecedented move has added to concerns about Hong Kong’s investment climate, senior private bankers and corporate lawyers told the outlet.
Though the majority of Lai’s wealth is offshore, including in the form of property in Taiwan, hotels in Canada, and U.S. stocks, the latest order would make it difficult for the mogul to transfer funds back to Hong Kong and support the operation of Next Digital.
In a statement on Wednesday, the media group said it has enough working capital to operate for at least 18 months without additional funding from Lai. Shares in Next Digital soared as much as 330% on Thursday, as it resumed trading almost two weeks after the government imposed an assert freeze on Lai.
An advisor described the move as “a big wake-up call” for the wealth management industry given the sweeping reach of the law. “In trying to nail Jimmy Lai and Apple to the wall, they might well be nailing that industry too,” he added.
A senior banker insisted that wealth stored offshore is secure as it falls under another jurisdiction, but the case of Lai may undermine confidence in this arrangement. Another banker notes that a growing number of clients are diversifying their risks by storing wealth in different places beside Hong Kong.
The 73-year-old media tycoon, who is serving a 14-month jail term for a peaceful protest in August 2019, faces a growing stack of charges, including fraud and collusion with foreign forces under the national security law.
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