Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, December 6, 2011

SEC Obtains Asset Freeze of Chinese Citizens Charged with Insider Trading

The SEC announced that it has frozen the assets of four Chinese citizens and a Chinese-based entity charged with insider trading in advance of a merger announcement by educational companies based in London and Beijing.  The SEC moved to obtain an emergency court order to freeze assets just two weeks after the suspicious trading by Sha Chen, Song Li, Lili Wang, and Zhi Yao, who have U.S.-based brokerage accounts. According to the SEC, they purchased American Depository Shares (ADS) of Beijing-based Global Education and Technology Group in the two weeks leading up to a November 21 public announcement of a planned merger with London-based Pearson plc. Some of their brokerage accounts were dormant until they bet heavily on Global Education shares, and some of the purchases made either equaled or exceeded the stated annual income of that trader. After the agreement was announced, they immediately began selling some of their Global Education shares. Their illicit gains totaled more than $2.7 million.

The SEC also charged All Know Holdings Ltd. and one or more unknown purchasers of Global Education stock in its complaint filed on December 5 in U.S. District Court for the Northern District of Illinois.

In addition to the emergency relief, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and financial penalties. The emergency court order that the SEC obtained on December 5 on an ex parte basis freezes more than $2.7 million of defendants’ assets held in U.S. brokerage accounts and, among other things, grants expedited discovery and prohibits the defendants from destroying evidence.

http://lawprofessors.typepad.com/securities/2011/12/sec-obtains-asset-freeze-of-chinese-citizens-charged-with-insider-trading.html

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Comments

Many countries other than China must also be wondering whether their assets are safe. Even India would remember the international sanctions that came after Pokhran II. Can India be absolutely confident that its assets outside India would be safe under all conditions?

Posted by: Superannuation Fund | Dec 14, 2011 2:20:17 AM

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