How the wheels came off Stark, unveiling a major corporate fraud

This company once had a valuation as high as 60 billion baht and was even included in the SET100 index, which lists the top 100 largest companies in the Thai stock market.

Stark borrowed huge sums of money from banks and bondholders, resulting in damages amounting to tens of billions of baht to the lenders.

The grand Stark fraud began when Phelps Dodge, an American electrical wire manufacturer, decided to sell its troubled Thai business. The buyer was Vanarat Tangkaravakun, the eldest heir of the TOA paint empire, for approximately 3 billion baht.

However, the deeper aspects of acquiring the electrical wire manufacturing business involved a key aide, Chanin Yensudchai, who masterminded the deal. Chanin, a former executive of Phyathai Hospital, had experience in business acquisitions and assisted Vanarat in strategising the business takeover.

Phelps Dodge's Thai operations had been plagued by losses, but surprisingly, in just a few years after Vanarat’s acquisition, the company was in the black. By 2019, Vanarat decided to list Phelps Dodge on the Thai stock market, not through a typical IPO but through a process called reverse takeover, also known as “backdoor listing”.

The starting point was Siam Inter Multimedia Public Co Ltd (SMM). SMM, primarily a media company, did not have sufficient cash to acquire Phelps Dodge. Therefore, SMM issued additional shares to Vanarat’s group, valued at 12.9 billion baht, making the Vanarat group the major shareholder of SMM.

After successfully entering the stock market, the Vanarat group sold off SMM's original business and renamed the company Stark Corporation. Initially, Stark appeared to be a normal business operation, showing no signs of impending fraud. However, towards the end of 2022, the company proposed a “capital increase” to several financial institutions, totalling 5 billion baht, to purchase Leoni Kabel and Leonische.

This triggered a massive storm, signalling the beginning of Stark's downfall. After receiving the capital increase, Stark's management cancelled the deal, citing significant changes in Leoni that could impact the company's financial status.

Suddenly, Stark's stock price plummeted for unknown reasons, and a flood of bad news emerged, leaving investors unprepared and shocked by the internal problems that were hidden behind the company's glamorous facade. The situation continued to escalate.
The failure to submit financial statements on time raised suspicion. Why would a company with continuous profit growth and substantial investment fail to meet its financial reporting deadlines? The delays persisted until the Stock Exchange of Thailand (SET) had to impose an “SP” (suspension) sign, halting trading temporarily.

Subsequently, negative news regarding the company's financial status kept surfacing.

The situation worsened during the three-month trading suspension when it was reported that Chanin, the chairman, and several other executives had resigned. Vanarat, the major shareholder, took over as the acting CEO and admitted that the company might have engaged in accounting fraud.

The company then reported to the Department of Special Investigation (DSI) to recover the company’s assets and conducted a Special Audit to uncover the full extent of the fraud, acknowledging significant financial damage.

The DSI issued summons for the key suspects in the Stark case, including Chanin and Sattha Chandrasetthalert, to report for charges on July 6-7, 2023, because evidence indicated accounting manipulations and benefit claims.

Subsequently, the Securities and Exchange Commission (SEC) referred the case to the DSI, accusing 10 former Stark executives, including Chanin, of falsifying financial statements during 2021–22, making false disclosures in securities offering filings, and fraudulently acquiring assets from deceived investors. The case was also forwarded to the Anti-Money Laundering Office (AMLO).

On the same day, the DSI issued an arrest warrant for Chanin after intelligence reports indicated he had fled the country. The SEC also ordered the seizure of assets and imposed a temporary travel ban on the offenders for 15 days.

The DSI later updated that investigators had traced and frozen Chanin’s assets in a Credit Suisse account, amounting to 220 million baht, in addition to previously frozen assets, including two plots of land and a house.

The SEC also filed a complaint against Chaninnart Yensutjai with the DSI for insider trading of Stark shares. The SEC's report was submitted to AMLO, which revealed that Chanin had transferred approximately 8 billion baht to the UK.

Investors are eagerly awaiting answers to questions about the company’s missing funds and whether the rumours of the former management fleeing with the money are true. The truth may soon be revealed, as reports indicate that the DSI is bringing back the key suspect in the Stark case to Thailand today.