U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23342 / September 10, 2015
Securities and Exchange Commission v. Benjamin Wey, et al., Civil Action No. 15-cv-7116 (S.D.N.Y., filed September 10, 2015)
SEC Announces Fraud Charges in Cross-Border Scheme to Secretly Control and Manipulate Stock of Chinese Companies After Reverse Mergers
UPDATE: The SEC has since dismissed its claims against many of these defendants. See Litigation Release No. 24105.
The Securities and Exchange Commission today announced fraud charges against a New York City businessman, his company, family members, and business associates accused of secretly obtaining control of 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.
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 Commission's complaint alleges that Wey, NYGG, Tianyi Wei, Newman and Uchimoto violated the antifraud provisions of the securities laws in Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933 (Securities Act). The complaint also alleges that Tianyi Wei, Michaela Wey, Newman, Uchimoto and Erbek aided and abetted violations of Section 10(b) of the Exchange Act, Rule 10b-5 thereunder and Section 17(a) of the Securities Act. Moreover, the complaint alleges that Wey, Tianyi Wei, and Michaela Wey violated the beneficial ownership reporting provisions of the securities laws in Section 13(d) of the Exchange Act and Rule 13d-1 thereunder, and that Tianyi Wei, Michaela Wey, Newman, and Erbek aided and abetted those violations. Lastly, the complaint alleges that Wey and Tianyi Wei violated Section 16(a) of the Exchange Act and Rules 16a-2 and 16a-3 promulgated thereunder by failing to report their ownership of over 10% of the securities of the NYGG Clients.
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.