October 21, 2019/US SEC
The Securities and Exchange Commission has filed an emergency action and obtained an asset freeze against eighteen traders in a scheme to manipulate more than 3,000 U.S.-listed securities for over $31 million in illicit profits.
The SEC alleges that the traders, who are primarily based in China, manipulated the prices of thousands of thinly traded securities by creating the false appearance of trading interest and activity in those stocks, thereby enabling them to reap illicit profits by artificially boosting or depressing stock prices. For example, according to the SEC’s complaint, the traders used multiple accounts to place several small sell orders to drive down a stock’s price before using a different set of accounts to buy larger amounts of the stock at the artificially low prices. After accumulating their position, the traders then flipped the script and placed several small buy orders to push up prices so they could then sell their stock at artificially high prices.
In a parallel action, the U.S. Attorney’s Office for the District of Massachusetts announced criminal charges against two of the traders, Jiali Wang and Xiaosong Wang.
The SEC’s complaint filed in federal court in Boston, MA, and unsealed on October 16, 2019, charges the traders (Shuang Chen, Lirong Gao, Jing Guan, Tonghui Jia, Xuejie Jia, Vicky Liu, Shun Sui, Lujun Sun, Huailong Wang, Jiadong Wang, Jiafeng Wang, Jiali Wang, Xiaosong Wang, Linlin Wu, Lin Xing, Yong Yang, Jiancheng Zhao, and Forrest (HK) Co., Limited) with violating and aiding and abetting violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, Sections 9(a)(2) and 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In addition to the asset freeze and other emergency relief obtained, the SEC seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief.
The SEC’s investigation was conducted by Andrew Palid and Michele T. Perillo of the SEC’s Market Abuse Unit in the Boston Regional Office with assistance from John Marino of the Market Abuse Unit, and was supervised by Mr. Sansone. The litigation will be led by Eric Forni of the Boston Regional Office and Mr. Palid. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority.