U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22320 / April 6, 2012
Securities and Exchange Commission v. Siming Yang, et al. Civil Action No. 12 CV 02473 (N.D. Ill, filed April 4, 2012)
SEC FREEZES ACCOUNTS OF SIX CHINESE CITIZENS AND ONE OFFSHORE ENTITY CHARGED WITH INSIDER TRADING
On April 4, 2012, the Securities and Exchange Commission charged six Chinese citizens and one British Virgin Islands entity with insider trading that resulted in illicit gains in excess of $9.2 million. The alleged insider trading occurred in the common stock and call options of Zhongpin Inc., a China-based corporation, in advance of a March 27, 2012, public announcement by Zhongpin that its Chairman and CEO, Xianfu Zhu, had made a non-binding offer to acquire all of Zhongpin’s outstanding stock at $13.50 per share, a 46% premium over the previous day’s closing price. Also on April 4, the SEC obtained an emergency court order freezing the defendants’ assets.
The SEC’s complaint, filed in U.S. District Court in Chicago, names Siming Yang, Prestige Trade Investments Limited (Prestige), Caiyin Fan, Shui Chong (Eric) Chang, Biao Cang, Jia Wu, and Ming Ni. The SEC alleges that they purchased substantial quantities of common stock and call options of Zhongpin in the two weeks before Zhongpin’s March 27 announcement, and that the purchases were notably inconsistent with the Defendant traders’ prior investment behavior, and inconsistent with their financial situations. The SEC alleges several aberrant features of Defendants’ trading including:
The SEC alleges that the defendants each violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition to the emergency relief, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties. The emergency court order that the SEC obtained on April 4 on an ex parte basis froze defendants’ assets held in U.S. brokerage accounts and, among other things, granted expedited discovery and prohibited the defendants from destroying evidence. The investigation is continuing.
A hearing on the SEC’s motion for preliminary injunction has been set for April 18, 2012 in the U.S. District Court for the Northern District of Illinois, Courtroom 2103, located at 219 South Dearborn Street, Chicago, Illinois, 60604.