U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23821 / May 1, 2017
Securities and Exchange Commission v. Wensheng Lin and Sheng Li Chen, No. 17 Civ. 3054 (VEC) (S.D.N.Y. filed April 26, 2017)
SEC Freezes $1.2 Million In Assets From Two Chinese Citizens For Illegally Selling Penny Stock Shares
The Securities and Exchange Commission charged two Chinese citizens with illegally selling more than 2.3 million penny stock shares for net profits of over $1.8 million.
According to the SEC's complaint filed in U.S. District Court for the Southern District of New York on April 26, 2017, Wensheng Lin and Sheng Li Chen acquired over 8.4 million shares of Immage Biotherapeutics Corp. (IMMG) at $0.0037 per share, or just over $31,000. Lin and Chen allegedly sold their shares for as much as $1.4745 and $1.1286 per share, collectively earning net profits of more than $1.8 million. According to the SEC, no registration statement was filed or in effect covering Lin's or Chen's sales, and no exemption from registration was available.
Also according to the SEC, the majority of Lin and Chen's profits derived from sales that occurred after promotional websites began touting IMMG. The SEC alleges that the touting claims on those promotional websites were, at a minimum, materially misleading.
The SEC suspended trading in IMMG on April 4, 2017.
The SEC also obtained an emergency court order freezing Lin and Chen's assets in their brokerage accounts, including approximately $1.2 million that otherwise would have been wired to bank accounts in Hong Kong, and millions of shares of stock. In support of the emergency asset freeze, the SEC argues that available evidence indicates that Lin and Chen, who purportedly purchased their shares from individuals located in South Africa, in fact purchased restricted shares from the issuer because the purported sales to the South African individuals did not occur. Among other things, the SEC states that one individual from South Africa never even purchased the shares that she purportedly sold to one of the Defendants.
The SEC's complaint charges Lin and Chen with violating Sections 5(a) and 5(c) of the Securities Act of 1933, and seeks permanent injunctions, disgorgement plus prejudgment interest, and penalties.
The SEC's continuing investigation is being conducted by Jennifer K. Vakiener, Hane L. Kim, Steven G. Rawlings and Joseph Darragh of the Microcap Fraud Task Force in the New York Regional Office. The case is being supervised by Lara S. Mehraban, and the litigation will be handled by Kevin P. McGrath, Ms. Vakiener and Ms. Kim. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.