U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19049 / January 25, 2005
Securities and Exchange Commission v. Jun Singo Liang, Case No. C-05-00330 (BZ) (N.D. Cal. filed January 25, 2005)
CHINESE INTERNET EXECUTIVE TO PAY OVER $1 MILLION TO SETTLE SEC INSIDER TRADING CHARGES
The Securities and Exchange Commission today filed and settled insider trading charges against a former executive of Chinese Internet technology provider NetEase.com, Inc., a Beijing-based company with offices in Newark, California. According to the Commission, Jun Singo Liang, a Chinese citizen and resident who headed NetEase's largest division, avoided losses of over $700,000 by selling his NetEase shares just days before a disappointing financial announcement caused the company's stock price to plummet. The Commission alleges that Liang, 27, sold the shares after learning that the NetEase division he managed - which typically accounted for half of the company's revenue - was going to substantially miss its revenue targets. Without admitting or denying the Commission's charges, Liang agreed to pay over $1 million in disgorgement and penalties and to be barred from serving as an officer or director of a public company for five years.
According to the Commission's complaint, filed in the U.S. District Court for the Northern District of California, Liang served as Senior Vice President and General Manager of NetEase's Wireless Business Department, the company's fastest growing division and largest source of revenue. Shortly before NetEase was scheduled to release its financial results for the third quarter of 2003, Liang learned that his division was likely to report a significant revenue shortfall. Over the two trading days leading up to the scheduled announcement, Liang sold more than 47,000 shares of NetEase stock (which trades as American Depositary Receipts on the Nasdaq National Market), realizing over $3 million in sales proceeds. After NetEase announced the revenue shortfall, the stock price plummeted by 23%. By trading ahead of this news, Liang avoided more than $700,000 in losses.
Liang, without admitting or denying the allegations in the complaint, agreed to pay disgorgement and prejudgment interest totaling $731,169 and a civil penalty of $355,129. The Commission, in deciding to seek a lower penalty than it might otherwise have pursued, took into consideration Liang's voluntary disclosure of his trading activity to his employer and to the Commission staff.
Liang further agreed to a five-year bar from serving as an officer or director of a public company and to a permanent injunction against further violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The Commission acknowledges the assistance of the National Association of Securities Dealers (NASD) in this matter.