The Securities and Exchange Commission has charged AutoChina International Limited and 11 investors, including a senior executive and director at the China-based firm, with conducting a market manipulation scheme to create the false appearance of a liquid and active market for AutoChina’s stock.
According to the SEC’s complaint filed in the U.S. District Court for the District of Massachusetts, AutoChina senior executive and director Hui Kai Yan, a former AutoChina manager, and others fraudulently traded AutoChina’s stock to boost its daily trading volume.
"AutoChina has reviewed the SEC’s complaint and believes that it is without merit. The company intends to defend against the claims vigorously and believes that all of the evidence it is aware of contradicts the SEC’s allegations. AutoChina continues to work closely with its legal counsel and advisors to defend the company," AutoChina said in a statement.
Starting in October 2010, the defendants and others deposited more than $60 million into U.S.-based brokerage accounts and engaged in hundreds of fraudulent trades over the next three months through these accounts and accounts with a Hong Kong-based broker-dealer.
The fraudulent trades included matched orders, where one account sold shares to another account at the same time and for the same price, and wash trades, which resulted in no change of beneficial ownership of the shares.
AutoChina and the other defendants engaged in the scheme after lenders offered AutoChina unfavorable terms for a stock-backed loan due to low trading volume in its stock.
“AutoChina and the other defendants engaged in a brazen manipulation of AutoChina’s stock to obtain favorable loan terms,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
“The SEC will hold accountable publicly-traded companies including foreign companies that violate the U.S. securities laws and disrupt the U.S. capital markets.”
“The investing public has a right to honest and fair markets," says David P. Bergers, Director of the SEC’s Boston Regional Office. "Manipulation of stocks has no place in the financial strategies of any public company.”
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