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(Bloomberg) -- Glancing at bags of cash stuffed to the brim earlier this month, Gary Fan simply wanted someone to remove them from an office in Hong Kong used by his political party.The former pro-democracy lawmaker had collected HK$2.7 million ($345,000) during an anti-government protest the day before, and was waiting for someone to pick it up from a mysterious group known as Spark Alliance that helps bail protesters out of jail. The next day, a person whom he knew and trusted came to collect the cash, even though Fan says he doesn’t know who exactly is behind the group or where the money ends up.“We just work by an honor system now, trusting them with a good cause,” Fan said in a Dec. 11 interview, adding that Spark Alliance has “earned credibility with real work” like getting legal assistance for protesters. Still, he said, “I absolutely agree there should be more disclosure, transparency and accountability when you take money from the public.”On Thursday evening, police announced the arrests of four people connected with Spark Alliance for suspected money laundering, the first cases brought over financing the demonstrations after six months of protests against China’s tightening grip over Hong Kong. Authorities froze HK$70 million of bank deposits and personal insurance products linked to the fund, while also seizing HK$130,000 in cash.“The police attempted, through false statements, to distort the work of Spark Alliance as money laundering for malicious uses,” the group said in a statement on Facebook. “Spark Alliance condemns this kind of defamatory action.”The crackdown deals a major blow to demonstrators as they face ever-mounting legal bills, with more than 6,000 people arrested since June. Spark Alliance, one of the largest crowd-funding campaigns supporting the protests, plays a crucial behind-the-scenes role -- often sending anonymous representatives to bail protesters out of jail in the middle of the night.The latest arrests risk deterring Hong Kong’s professional class from giving more cash, potentially curbing a substantial source of funds that have helped sustain the protests longer than anyone had expected. They also show the limits of the leaderless movement’s ability to manage tens of millions of dollars with little oversight outside of a formal financial system.Funds bankrolling the protests have collectively raised at least HK$254 million ($33 million) since June, with 70% coming from just two groups, Spark Alliance and the 612 Humanitarian Fund, according to a tally based on disclosures from the groups and an analysis of publicly available documents. That figure doesn’t reflect all the money raised related to the protests, only the funds Bloomberg News could verify.The $33 million alone amounts to a third of the money the city has spent in overtime pay to 11,000 police officers since June, and would be able to purchase some 300,000 gas masks. But the largest costs faced by protesters are legal fees that may stretch out for years.Nearly 1,000 people have been charged for offenses like rioting, which carries a jail sentence of as much as a decade, according to police. The 612 Fund says it can cost up to HK$1.8 million per person for a 60-day legal defense, and many trials last far longer. Some proceedings related to Hong Kong’s 2014 Occupy protests are still ongoing.Among dozens of groups, Spark Alliance is one of the most secretive: Even some donors and lawyers who assist the group say they don’t know who runs it, while the bank account listed on its website belongs to a firm that owns a pest control company. A person who picked up Spark Alliance’s hotline last week said the number was only for protester requests. The group didn’t respond to requests for comment via Facebook, Whatsapp or Telegram.‘We Need Protection’“Spark is probably less transparent but people tend to believe them,” said Jason, a protester in his 30s who asked to be identified by his English name. He said he memorized the group’s phone number and called the group after he was arrested in August. Seven hours later, two lawyers helped arrange HK$4,000 in bail money.“Everyone knows the cost to fight for this movement and not everyone can afford lawyer fees,” he said. “We need protection.”Over the past few months he’s raised half a million dollars for Spark Alliance and other charities through the sale of Hong Kong-themed figurines, including a miniature Carrie Lam and a masked protester. Asked on Thursday night if he would still give the money to Spark Alliance, Jason said he wanted more information on the arrests.Even before the police action on Thursday, many of the bankers, accountants and other Hong Kong professionals who give money in lieu of battling authorities in the streets were concerned about retribution for supporting the protests. While lawyers say it would be difficult to prove a donor violated any laws, people fear that reporting mechanisms in place to deter terrorist financing and anti-money laundering could still end up flagging contributions to authorities.HSBC Holdings Plc last month said it shut down Spark Alliance’s bank account after it “spotted activity differing from the stated purpose of the company account.”HSBC decided to close the account, according to people familiar with the matter who asked not to be identified. Freezing it would entail locking up millions in funds raised to support the protesters. After closing the account, the bank returned more than HK$50 million in checks to people affiliated with Spark Alliance, one of the people said. It’s unclear whether the group has found another bank since the checks haven’t been cashed and the account owner hasn’t provided relevant information, they said.Why Hong Kong Is Still Protesting and Where It May Go: QuickTake“HSBC never takes the decision to suspend or close any account lightly,” spokeswoman Maggie Cheung said, while declining to comment on specific details. On Friday, the bank said its decision to close the account was unrelated to the “current Hong Kong situation,” without elaborating.Spark Alliance’s Facebook page lists the account holder as Prime Management Service Ltd. According to Hong Kong’s companies registry, the only business in active operation with that name is wholly owned by company director Tony Wong, who also runs a pest control company, according to LinkedIn. Reached on Dec. 11 through a mobile phone number listed in the registry, Wong said he “did not know these things” and hung up when asked why Prime Management Service lent the use of its bank account to Spark Alliance.Spark Alliance said on Nov. 18 it would cease accepting money via bank transfers after HSBC closed its account. Instead, it said it would sell gift cards through its website. Since then, a stream of supporters have posted photos of their gift card receipts on Facebook. Transactions are processed by Paypal and Stripe, but it’s unclear where the funds go from there. On Friday, its website appeared to be stripped of all previous information and a donation function.‘Encourage Teenagers’Earlier this month, the Hong Kong government referred requests for comment to the police, which had declined to comment. On Thursday, police said Spark Alliance claimed to help arrested protesters but instead bought personal insurance products.“We do not exclude the possibility that the fund is used as a reward to encourage teenagers to come out and join in the civil unrest,” Acting Senior Superintendent Chan Wai-kei told reporters. Police didn’t disclose the names of those arrested.The shadowy nature of financing for the protests has helped China’s government and state-run media outlets push a narrative that the demonstrations are being financed by the U.S. and other foreign powers. Beijing threatened sanctions this month against U.S.-based groups like the National Endowment for Democracy, which donated $686,000 to Hong Kong nonprofits in 2019. The group called China’s accusations “categorically false.”On the ground in Hong Kong, fundraising tactics have been hotly debated among protesters as legal costs increase. Some have criticized Spark Alliance for a lack of transparency and others have denounced the 612 Humanitarian Fund -- the other main financing arm of the protests -- for hoarding cash.Named after the date in June when demonstrations escalated, the 612 fund appears to be the polar opposite of Spark Alliance. It discloses audited financial statements online and requires protesters to give real names for legal aid. The fund has 19 employees and trustees include well-known local figures like singer Denise Ho, Cardinal Joseph Zen, and barrister Margaret Ng.The vastly different management styles of Spark Alliance and 612 fund mirror divergent tactics in the wider protest movement, which has sought to avoid the splintering factions that have hurt previous democracy crusades in Hong Kong. One side caters to front-line protesters who use anonymity and violence to pressure authorities, while the other supports the pro-democracy movement’s goals within traditional legal bounds.The 612 fund has been chided in online forums for deploying only 24% of the money it raised while asking protesters to first apply for legal aid from the city. Other critics see the 612 fund as part of an older political establishment in Hong Kong that has failed the younger generation of democracy advocates, and they believe Spark Alliance is closer to protesters in the trenches.“The younger generation doesn’t trust in any institutions, not even those that advocate for democracy,” said Patrick Poon, a researcher at Amnesty International in Hong Kong. “It’s an irrational decision to trust in a group believed to be closer to the people on the ground even if they don’t know who is behind the fund.”Ng, a 612 fund trustee, said the group is supported by “members of the public that are incensed by what is being done by police and government.”“The movement is ongoing and we are using the funds for the stated purpose of humanitarian aid,” she said. “We don’t have any obligation to spend all the money immediately.”For protesters like Ventus Lau, a 26-year-old activist who has been arrested twice during the protests, the debate over financing risks undercutting the wider aims of the movement. Many demonstrators head to the front lines due to the confidence that others will help them financially if they are arrested, he said.“It has been our core value that there is no division in this movement,” he said. “Not only Spark, whenever there is any criticism, we feel we should not be criticizing anyone else -- at least until final victory.”Lau was first arrested in August for unlawful assembly at a demonstration he helped organize that later turned violent. He was detained for 46 hours before a 612 fund representative showed up with HK$5,000 ($640) in bail money. A couple of weeks later, he was arrested again for his suspected role in the July 1 storming of Hong Kong’s Legislative Council building.Lau said his lawyer plans to apply to the 612 fund to pay for his defense, which could span years and cost hundreds of thousands of Hong Kong dollars. The funds raised so far have helped protesters but won’t be enough to cover all of their legal expenses, he said.“We take a lot of risks when we go to protests and some people can’t take that risk, so they donate money,” Lau said. “When they watch the news they feel guilty or powerless and feel a heavy duty to do something, so they will trust anyone.”The biggest funds sprung into action when the anti-extradition bill protests erupted in June and police started arresting demonstrators en masse. Alongside them grew a separate network, largely online, to pay for things like helmets, masks, food vouchers and other front-line supplies. It’s trickier to tally those donations since they’re arranged through messaging apps or dropped off at demonstrations. These items don’t cost much --a petrol bomb costs about $10 -- but are often discarded to avoid arrest.For many young demonstrators, the funds are an essential lifeline. Peter To, a 22-year-old front-line protester, said he lost his job after joining too many work strikes and now has no income.“If I didn’t have this help, I’d be in real trouble and wouldn’t have money to eat,” he said.The methods for supporting protesters have become increasingly sophisticated, with message apps like Telegram supporting case management systems. Earlier this month, a poster who said she was 16 years old asked for HK$1,500 from a group with 4,000 subscribers called “Want Rice, I Pay,” saying her parents wouldn’t support her after she was caught sneaking off to demonstrations. Hours after the group’s administrator issued her case no. 73, she was matched with a donor.A 19-year-old student surnamed Ling, who regularly goes to the front lines, described the crucial role played by what she refers to as an online “parent” who pays for safe houses to sleep in after protests. “Police will follow protesters back home and arrest them,” she said.Donors say the need for more financial support is only going to grow larger, especially for the hundreds of protesters who face mounting legal costs. Ms. Leung, a banker in her 30s who donates $600 a month to groups including 612 and Spark Alliance, said the lack of transparency around some funds didn’t bother her.“It’s not a lot of money and I’m happy as long as I can help people in need,” she said, requesting that she only be identified by her surname for fear of reprisals. “The movement wouldn’t have lasted this long if people didn’t give support.”Fan, the former pro-democracy lawmaker, collected bags of cash for Spark Alliance at a rally with government approval convened by Civil Human Rights Front, which has held six major marches since June. Vice-convener Eric Lai said each one costs more than HK$250,000 to put on, excluding insurance fees, with excess money directed to the 612 Fund.After the arrests connected to Spark on Thursday night, Fan directed his ire at the authorities.“I am more concerned of how the police and government to suppress the movement more than how Spark Alliance handled the funds,” he said. “I am worried those in need for legal aid and in jail would lose one major form of help.”(Updates with HSBC statement.)\--With assistance from Shawna Kwan, Blake Schmidt, Josie Wong, Aaron Mc Nicholas, Natalie Lung and Justin Chin.To contact the reporters on this story: Shelly Banjo in Hong Kong at sbanjo@bloomberg.net;Alfred Liu in Hong Kong at aliu226@bloomberg.net;Kiuyan Wong in Hong Kong at kwong739@bloomberg.netTo contact the editors responsible for this story: Daniel Ten Kate at dtenkate@bloomberg.net, Jonas BergmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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