SEC Charges a Taiwan-Based Insurance Company and a Former Insider with Fraudulent Market Manipulation Scheme
Litigation Release No. 24378 / December 21, 2018
Securities and Exchange Commission v. China United Insurance Service, Inc., et al., No. 18:CV:12055 (S.D.N.Y. filed Dec. 20, 2018)
A Taiwan-based insurance company and one of its former managers have agreed to settle fraud charges brought by the Securities and Exchange Commission relating to a scheme to manipulate the company's trading volume.
The complaint alleges that, from approximately December 2013 through March 2018, China United Insurance Service, Inc. and Cheng-Hsiung Huang schemed to deceive the investing public and Nasdaq, for the purpose of obtaining a listing on Nasdaq, that the trading volume in the company's stock was derived from bona fide market activity. Huang, acting on the company's behalf, used multiple brokerage accounts to engage in numerous transactions in the company's stock. When Huang's trading was flagged by a U.S.-based brokerage firm for high volume and possible prearranged trading and several of the accounts were frozen, Huang and two colleagues contacted the brokerage firm and lied about their identities, their relation to China United, and their reasons for trading.
The SEC's complaint alleges that China United and Huang violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations in the complaint, China United and Huang agreed to the entry of a final judgment that enjoins them from violating the charged provisions of the federal securities laws, orders China United to comply with its undertaking to retain an independent compliance monitor, and orders Huang to pay a penalty of $30,000. Based upon China United's cooperation with the SEC's investigation, the SEC is not seeking a monetary penalty against the company.
The SEC's investigation was conducted by Gary M. Zinkgraf and Thomas Bednar and supervised by Jeffrey P. Weiss and Stephan Schlegelmilch. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.