A merchant has been convicted by the District Court for his role in a $260 million letters of credit fraud based on non-existent commercial transactions.

Chen Xun, 75, was found guilty of five counts of conspiracy to defraud. Deputy Judge Johnny Chan adjourned sentencing to December 8, remanding Chen in custody.

Between August 1994 and March 1996 Chen conspired with others to defraud the Hong Kong branches of Kincheng Banking Corporation, Kwangtung Provincial Bank and the Bank of China.

He dishonestly caused Senox Investment, Group Yield Enterprises and Go On Yue Fung Industry to apply to those banks for the issue of a total of 50 letters of credit payable to Max Rise Industrial.

In order to support the letters of credit applications he submitted false documents to the banks purporting to be evidence of genuine underlying commercial transactions of various goods between the three companies and Max Rise. However, there were no such genuine transactions.

As a result the banks were deceived into releasing a total of more than $265 million to Max Rise under the letters of credit.