Securities and Exchange Surveillance Commission is about to put an End to Kitao’s SBI

Will the lifeline finally snap? Where did the secret 20 billion yen (?) borrowed from the lover of the last market maker, the late Haruo Nishida, go?

May 20, 2012

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It was in mid-July that the president of a real estate company received a visit from a mysterious man.

The visitor was the heir to a family-owned securities company which was once well-known in Osaka. We will call him “Mr. I”. This visitor, who is now over 60 years old, said a quick hello and began to talk about the subject that was the purpose of his visit.

“An overseas inventor wants to purchase some properties in Japan but wants to do so under someone else's name. Would it be possible for this person to use your name? ”

Mr. I said that immediately after a property was purchased using the president’s name, a major real estate company would then purchase it, and mentioned the name of a company that everyone has heard of.

When the president had some doubts and asked for the overseas investor’s name, Mr. I momentarily looked hesitant but revealed the name.

“The name of the investor is Ms. Shirasugi. She is currently in London and is extremely wealthy.”

Mr. I purposely lowered his voice, probably because he wanted to emphasize the level of Shirasugi’s wealth, and added – “Ms. Shisasugi has lent a significant amount of money to the infamous SBI, too.”

Obviously, he was talking about SBI Holdings (listed on the 1st Section of the Tokyo Stock Exchange) led by Yoshitaka Kitao. The visitor was saying that this wealthy person called Shirasugi had lent a significant amount of money to SBI who had been walking a tightrope manipulating accounting and trying to solve its severe cash-flow problems.

How much was he talking about? There is a clue. SBI held a financial results briefing in January 2012, at which Kitao explained, “In September, 2011, in the 2nd quarter, the credit line was set at 40 billion yen and the draw down was 20 billion yen.” This means that 20 billion yen out of the maximum amount of money SBI is allowed to borrow (40 billion yen) has been already lent to SBI. The name of the financial institution involved was not revealed. That is understandable, because the source of that 20 billion yen was something that must be kept secret.

A Big Target after the Nomura Case has been closed

FACTA has been running a series of articles (7 in total) including this one detailing investigations into SBI’s conduct since the January issue (released on December 20, 2011) and has exposed hidden realities one after another. This series of articles will soon come to an end so let me tell you about how we found out about SBI’s misconduct – information provided to FACTA in November last year showed that Shirasugi’s money is going into SBI.

Soon after the New Year holidays, Ms. Shirasugi secretly came back to Japan - we gathered information through interviews, etc. that during this visit, Shirasugi met with a few people in shares and visited the above-mentioned Mr. I who is acting as her agent in Japan.

Why is FACTA covering a story about Shirasugi in this issue? It is because Shirasugi’s funds that were managed in London began flowing back to Japan, and it seems that during that process, Shirasugi has been trying to withdraw the funds that she has lent to SBI. This means, however, that Kitao’s last lifeline will snap.

Another reason is that after having ended the all-out war with Nomura Holdings regarding its insider trading involving client capital increase plans in July, the Securities and Exchange Surveillance Commission suddenly began animated.

The Commission has been secretly investigating SBI for a few months - it is almost as if FACTA’s coverage is the reason why it began the investigations - and Chairman Kenichi Sado revealed, “We are investigating (SBI’s situation) with keen interest,” and has recently said, “We would like to start (investigations into SBI’s situation) with the issue of information disclosure (to investors) including false information.”

FACTA has been pressed to decide to aim its big guns at SBI.

The Money came from IB Daiwa

So, who is this investor called Shirasugi? We would like to shed light on this matter to begin with.

Her full name is Keiko Shirasugi. She is a female investor in her mid-50s known to those in the world of shares who are in the know. Her existence became known due to her relationship with Haruo Nishida who was called the last market maker. Before her relationship with Nishida, she would have been brushed off in the market as “a middle-aged woman who does not know anything about finance.” Although it was she who made the first move, Nishida transformed her into a wealthy person who provided 20 billion yen of financing for SBI.

It was FACTA that got the scoop that Nishida had died (of illness) on March 4 last year before any other magazines.

His life was full of very impressive stories. He never had bank accounts or credit cards because he really hated leaving any traces - he was afraid that the authorities would catch him out. He stayed at different hotels always under false names and carried a lot of share certificates and cash in a roller bag.

The brand that was said to be his masterpiece is Horin (later the trade name was changed to Japan Auction System, then to SAKHA DIAMOND Corp.). He bought junk stocks for tens of yen and raised the price using methods such as issuing privately offered corporate bonds, and eventually set up a high market price of 2500 yen.

During that time, 3 billion yen in cash was carelessly stacked in Nishida’s hotel room. Looking at the stacks of bills, he hummed to himself a self-made parody of a traditional-style Japanese popular song called “Naniwa Koishigure”.

“I would make even my wife cry in order to be successful in share trading......”

Nishida was living this kind of life when Keiko Shirasugi, who lived in Toda City in Saitama Prefecture and was driving an old BMW, met him. It was easy for her to wrap Nishida, who loved women, round her little finger. Before he knew it, she was acting as his secretary and kept those who close to him at arm’s length so they had to go through her in order to meet him.

When Shirasugi stayed at a hotel with Nishida, she used a false name in the same way as he did. However, she always used the same false name, which was “Yuko Tanaka” (we do not know the reason).

When she met Nishida, the brand he was handling was IB Daiwa Corporation (currently Principal Corporation listed on the NASDAQ), and this is the brand that made Shirasugi, who had been a layperson in terms of shares, change into an investor.

The above-mentioned Mr. I was the president of IB Daiwa for some time. In 2005, the company’s share price, which had been hovering at a low level of 20 to 30 yen, jumped straight to almost 300 yen. Some market makers with Nishida as the leader set this up. Needless to say, Nishida made a profit of billions of yen, but Shirasugi utilized this opportunity and made a profit larger than Nishida’s without his knowledge.

Nishida, who said “I trust a person after the second meeting,” trusted Shirasugi completely. He did not know that IB Daiwa shares had been transferred to her.

Shirasugi went to the UK with this profit (reportedly worth 6 billion yen). She explained to those close to her that that she was going for treatment for her son’s hearing difficulties, but in the UK she built a relationship with Crosby Capital Partners listed on the London Stock Exchange AIM Market for emerging companies.

While she was planning to take IB Daiwa public on the AIM, she started connecting with Crosby’s CEO, Simon Fry and the leading money maker of Nomura Securities’ UK head office in London in the 90’s, Guy Hands.

Sudden Increase of 5.3 Billion Yen in Borrowings pledged by Securities

A Hako company (a listed company whose stock price has dropped, and no-name funds and market makers buy all its stocks and use it as a money game tool) called QUANTS (listed on the NASDAQ at the time) that became the prey of the hyena-like funds of Nishida and others issued warrant bonds of 4.5 billion yen in 2007 and a fund called Nippon Equity Partners took them on. BlueCrest Capital Management (currently GLG) in London arranged this fund, and this is the company that Shirasugi is using as the base for her investment activities. Another investment company where she is pulling the strings behind the scenes is Trafalgar Capital Management.

After Nishida’s death, Shisasugi’s wealth increased in no time. According to a source close to her, last fall, she used Citibank in London to take out a syndicated loan, and then loaned a considerable amount of money to SBI holdings. The same source also said that the loan had been repaid on March 30 before the end of a fiscal year in March this year upon Shirasugi’s request, but that a significant amount had been re-loaned to SBI using the same method after a plea from Kitao.

Reportedly, SBI Securities’ shares were used as security. This transaction was recorded under “borrowings pledged by securities” on the balance sheet and handled as a securities-related liability. On August 9, the SBI Group announced its financial results for the period from April to June. Borrowing pledged by securities increased from 7.65 billion yen as of March 31 to 12.96 billion yen as of June 30, which was a sudden increase of 5.3 billion yen. What if Shirasugi money is hidden in this and it is withdrawn.....?

FACTA repeatedly disclosed the trick of how deficit-ridden SBI Pharma (formerly, ALApromo) was made into a company with a ridiculous total market value of 72 billion yen. Now the Securities and Exchange Surveillance Commission is about to bring to light SBI’s futile struggle to survive by repeating acts which are strongly suspected as violations of the Financial Instruments and Exchange Act such as the falsification of reports and accounting and managing to get through the situation.

Kitao had been making a fool of market makers, but when it is revealed that SBI has used the forbidden fruit of Shirasugi’s money coming from a market maker and it is put to an end, SBI will have no future.(Titles omitted)