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SEC Files Fraud Charges Against China Energy Savings Technology, Inc. and Others; Court Orders Asset Freeze


Washington, D.C., Dec. 4, 2006 - The Securities and Exchange Commission today filed an emergency action against China Energy Savings Technology, Inc., several of its former officers, its controlling shareholder, and others, alleging that they orchestrated an elaborate stock manipulation scheme.

The Commission alleges that China Energy and the company's undisclosed control person, Chiu Wing Chiu, with the assistance of the company's Corporate Secretary, Lai Fun ("Stella") Sim, devised a wide-ranging stock manipulation scheme to fraudulently obtain Nasdaq National Market System (NMS) listing, artificially inflate China Energy's stock price, and sell millions of China Energy shares into the U.S. capital markets.

According to the Commission's complaint, other participants in the scheme included the company's former purported Chairman and CEO, Sun Li; a former company employee, Zhao Jun Tang (J. Zhao); and New Solomon Consultants, which was China Energy's majority shareholder. All the defendants reside or have operations abroad.

The federal district court for the Eastern District of New York today issued an order freezing assets that covers $3.9 million held in four brokerage accounts in the names of relief defendants Precise Power Holdings Limited, Essence City Limited, Amicorp Development Limited, and Yan Hong Zhao. The Commission alleges that these accounts realized millions in proceeds from the fraudulent scheme by receiving and selling thousands of shares of China Energy stock.

Linda Thomsen, Director of the SEC's Division of Enforcement, said, "Today's court action demonstrates that the Commission will take emergency action where necessary to freeze ill-gotten gains for the protection of investors."

Antonia Chion, Associate Director of the SEC's Division of Enforcement, stated, "The alleged scheme created the false appearance of genuine economic interest in China Energy's securities. No matter how intricate the scheme, we will act to hold stock manipulators accountable."

Among other things, the Commission's complaint alleges that Chiu and Sim formed China Energy through transactions with a Nevada shell corporation called Rim Holdings, Inc. and a British Virgin Islands holding company called Starway Management Limited. According to the Commission's complaint, in furtherance of the scheme, the defendants caused China Energy to purchase Starway at an excessive price to facilitate the issuance of large quantities of China Energy shares to entities controlled by Chiu; caused China Energy to obtain a NMS listing by artificially creating a shareholder base and falsely representing to Nasdaq that the company had met its minimum shareholder requirement; issued false press releases concerning China Energy's NMS listing; created artificial demand for China Energy stock by engaging in manipulative trading and entering into secret deals to give free China Energy stock to shareholders willing to purchase China Energy in the open market; and concealed the fact that Chiu controlled both the company and the company's public float.

In addition, according to the Commission's complaint, China Energy, Chiu, and others engaged in illegal unregistered sales by gifting shares to more than 400 persons as part of the Nasdaq listing scheme and by improperly issuing S-8 stock to promoters engaged in capital raising activities and consultants who performed no services.

The Commission's complaint charges China Energy, Chiu, Sim, J. Zhao, Li, and New Solomon with violating the antifraud provisions of the federal securities laws and China Energy, Chiu, Sim and J. Zhao with violating the registration provisions of the securities laws. It seeks permanent injunctions prohibiting future violations of the securities laws, disgorgement, and civil penalties. With respect to Chiu, Sim, J. Zhao, and Li, the Commission also seeks officer and director bars and penny stock bars.

The Commission has taken prior action with respect to China Energy and its securities. On two occasions earlier this year, the Commission issued orders suspending trading in China Energy's securities. See Release Nos. 34-53839 (May 19, 2006) and 34-54503A (Sept. 26, 2006). On September 26, the Commission instituted administrative proceedings against China Energy to determine whether to revoke or suspend China Energy's securities due to its failure to make periodic filings. Release No. 34-54502 (Sept. 26, 2006).

The Commission would like to acknowledge the assistance afforded by the Hong Kong Securities and Futures Commission in this matter.

The Commission investigation is continuing.

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For more information, contact:

Antonia Chion
Associate Director
(202) 551-4842

Kara N. Brockmeyer
Assistant Director
(202) 551-4767

United States Securities and Exchange Commission
Division of Enforcement

  Additional materials: Litigation Release 19933; Complaint



Modified: 12/04/2006