Four guilty in Hong Kong’s first stock manipulation case

Four people have been found guilty for inflating the liquidity in shares of a listed company in Hong Kong, in what the city’s stock market regulator has described as its first and largest ever market manipulation case.

The four, Chan Chin-yuen, Elaine Au Yeung Man-chun, Chan Chin-tat, and Chiu Siu-fung, conspired to create a false or misleading impression with respect to shares in Hong Kong Stock Exchange-listed Asia Standard Hotel Group, according to the city’s Securities and Futures Commission (SFC).

Between August and September 2005, three of the four traded in shares of the company between themselves, with the final member – Chan Chin-yuen – funding the trades conducted by his co-conspirators. This made the hotel investment and management company’s shares seem more liquidity, raised their price by 78 per cent, and boosted the company’s market capitalisation by HK$4 billion, the commission said.

The commission said the actions by the four during the period in question made up for more than half of all the trades – totalling HK$190 million – that were made in the shares of the company.

“Market manipulation is a serious crime of dishonesty designed to defraud the investing public for illegal profit. In this case, we allege the market was given an entirely false picture of the market for shares in this company, giving a falsified value to the tune of HK$4 billion. Criminals who think they can take advantage of innocent investors by falsifying the market are on notice by this result that the SFC will fight them all the way,” said Mark Steward, the commission’s executive director of enforcement.

Sentencing will carried out on November 26. The defendants could now face up to 10 years in jail and a HK$10 million fine. The four were released on bail of HK$200,000 each, the regulator said.

In addition, Chan Chin-tat, and Chui have also been charged with failing to answer questions, as required under an SFC investigation, without a reasonable excuse. They will be tried separately for these charges, and trial is set to begin on December 17.