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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22837 / October 9, 2013

Securities and Exchange Commission v. Lee Chi Ling, et al., Civil Action No. 13-CV-5364 (E.D.N.Y.) (Korman, J)

SEC Files Fraud Charges Against Lee Chi Ling and Perfect Genius Limited for Their Roles in a Wide-Ranging Stock Manipulation Scheme

The Securities and Exchange Commission filed an action related to an elaborate stock manipulation scheme involving shares of China Energy Savings Technology, Inc. against Lee Chi Ling, as a defendant, and Perfect Genius Limited, as a relief defendant. The fraudulent scheme was orchestrated by Chiu Wing Chui, Lai Fun Sim, Jun Tang Zhao (together, the Chiu Group), Lee, and others acting in concert. As discussed below, Chiu, Sim, Zhao, and others were previously charged and found liable for fraud for their roles in the scheme.

The Commission's complaint, filed on September 26, 2013 in the Eastern District of New York, alleges that Lee played a crucial role in the illegal scheme. According to the Complaint, Lee or entities that she controlled, including Perfect Genius, furthered the fraud by: (i) receiving shares of China Energy directed to her by the Chiu Group; (ii) selling some of those shares to profit from artificially high prices created by transactions directed by the Chiu Group and their dissemination of false and misleading information about China Energy to investors and the public; and (iii) acting as nominees, along with a number of other entities, which concealed the illegal trading in the shares of China Energy and masked the Chiu Group's control of China Energy.

In its complaint, the Commission alleges that Lee violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder, and Sections 17(a)(1) and (3) of the Securities Act of 1933; and seeks disgorgement and prejudgment interest. The Commission also names Perfect Genius as a relief defendant, seeking the return of ill-gotten gains from the sales of China Energy securities in an account that Lee opened in the name of that entity for the purpose of furthering the scheme and holding the resulting illicit proceeds.

SEC v. Lee is the latest in a series of enforcement actions brought by the Commission concerning the China Energy fraud:

  • On December 4, 2006, the Commission filed a fraud complaint against China Energy, Chiu Wing Chiu, who was the undisclosed control person of China Energy, and several of Chiu's associates. SEC v. China Energy 06-CV-6402 (EDNY). (Press Release 2006-200; Lit. Rel. 19933; Complaint) The Commission also obtained an emergency order freezing $3.9 million in assets held in four U.S. brokerage accounts by nominees of Chiu Wing Chiu.
  • On December 6, 2006, the Commission issued an order revoking China Energy's stock registration statements (Admin. Proc. 34-54881). The Commission had previously issued orders suspending trading in China Energy securities on May 19, 2006 (Lit. Rel. 34-53839) and September 26, 2006 (Lit. Rel. 34-54503A).
  • On March 27, 2009, the Commission obtained final judgments in SEC v. China Energy against Chiu, Lai Fun "Stella" Sim, Jun Tang Zhao, Sun Li, and New Solomon Consultants, finding them liable for fraud, and ordering them to pay over $34 million in disgorgement, prejudgment interest, and civil penalties. The court also imposed officer-and-director bars against Chiu, Sim, Zhao, and Li.
  • On July 31, 2009, the Commission obtained final judgments SEC v. China Energy against the relief defendant nominees of Chiu, ordering that the $3.9 million held in the relief defendants' U.S. brokerage accounts be turned over to the Court as proceeds of the fraud.
  • The Commission also obtained a final judgment against Jason Genet, finding him liable for fraud; permanently enjoining him from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; ordering Genet to pay $2,527,745 in disgorgement, prejudgment interest and penalties; and barring him from participation in any offering of a penny stock for five years from the date of the judgment. (Lit. Rel. 34-21232)
  • On December 20, 2010, the Commission also issued an Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 4C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order against Moore Stephens Wurth Frazer & Torbet LLP (MSWFT) and Kerry Dean Yamagata (Admin. Proc. 3-14167/33-9166).

http://www.sec.gov/litigation/litreleases/2013/lr22837.htm


Modified: 10/09/2013