SEC Announces Fraud Charges in Cross-Border Scheme to Secretly Control and Manipulate Stock of Chinese Companies After Reverse Mergers
The Securities and Exchange Commission today announced fraud charges against a Wall Street CEO and his company, family members, and business associates accused of secretly obtaining control and manipulating the stock of Chinese companies they were purportedly guiding through the process of raising capital and becoming publicly-traded in the United States.
The SEC alleges that Benjamin Wey and New York Global Group (NYGG) typically structured reverse mergers between clients and publicly-traded shell companies in such a way that he and other family members secretly obtained ownership interests of more than five percent of the newly listed companies. To avoid detection and evade SEC reporting requirements as beneficial owners, they divided their shares among a vast network of foreign accounts and generated tens of millions of dollars in illegal profits as they sold the securities into artificially inflated markets. The illicit profits eventually circled back to Wey and his wife, who used the money to finance a lavish lifestyle.
Also charged in the case in addition to Benjamin Wey and NYGG are his wife Michaela Wey and sister Tianyi Wei, their Switzerland-based broker Seref Dogan Erbek, and two attorneys Robert Newman and William Uchimoto.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Benjamin Wey and Dogan Erbek.
“We allege that when the Weys and NYGG were supposed to be helping Chinese companies go public in the U.S., they were secretly obtaining control of blocks of their clients’ shares so they could manipulate the markets and derive illegal profits. The Weys and their attorneys went to extraordinary lengths to hide their scheme, but they underestimated our ability to piece it together,” said Antonia Chion, Associate Director of the SEC’s Division of Enforcement.”
The SEC’s complaint alleges violations or the aiding and abetting of violations of the antifraud provisions and the disclosure and reporting provisions of the federal securities laws.
The SEC’s investigation was conducted by Patrick L. Feeney and Steven A. Susswein, and supervised by Melissa Hodgman. The litigation will be led by Cheryl L. Crumpton, Joshua Braunstein, and Derek Bentsen. The SEC appreciates the assistance of the Federal Bureau of Investigation, U.S. Attorney’s Office for the Southern District of New York, Financial Industry Regulatory Authority, Securities and Futures Commission of Hong Kong, Monetary Authority of Singapore, Ontario Securities Commission, and British Columbia Securities Commission.