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Fraud charges against New York-based financier Benjamin Wey over Chinese 'reverse mergers'
Financier allegedly used Chinese companies seeking to raise US capital
PUBLISHED : Saturday, 12 September, 2015, 3:54am
UPDATED : Saturday, 12 September, 2015, 5:38am
Benjamin Robertson and Agencies
Benjamin Wey, head of New York Global Group.Photo: Reuters
A sharp-suited multimillionaire has been charged by US authorities with securities fraud over deals to list Chinese companies in New York that allegedly netted him tens of millions of US dollars in illegal profits.
Benjamin Wey, 43, the head of New York Global Group, was arrested on Thursday.
US Justice Department prosecutors charged Wey and his Swiss-based banker, Seref Dogan Erbek, with conspiracy, securities fraud and other crimes.
Through a Beijing-based subsidiary, prosecutors said, Wey offered to help Chinese companies raise US capital by arranging reverse mergers, in which the Chinese companies took control of the US shell companies that were already publicly listed.Wey got the companies listed on Nasdaq by fraudulently inflating the number of shareholders and hiding his ownership interest from the exchange, authorities said.
The companies were Smart-Heat, Deer Consumer Products and CleanTech Innovations, the indictment said.
Wey manipulated the stock prices by causing two brokers to solicit customers to buy shares while discouraging sales, the indictment alleged. Wey later sold out for a profit, prosecutors said.
Complaints against Wey go back at least four years. New York hedge fund manager Jon Carnes told the South China Morning Post he filed whistleblower complaints against Wey with US regulators in 2011.
In a March 14, 2011 research report by Carnes on Nasdaq-listed Deer Consumer Products - a Chinese kitchen appliance maker and one of the firms named in the indictment - Carnes accused Wey and his associates of hiding their shareholdings in the firm. Deer was later delisted from the Nasdaq.
Carnes said Thursday's indictments were vindication of his efforts but the reputation of US-listed Chinese firms would suffer.
The US Securities and Exchange Commission on Thursday filed a parallel civil lawsuit that included as defendants Wey's wife, Michaela Wey; his sister, Tianyi Wei; and two attorneys, New York-based Robert Newman and Pennsylvania-based William Uchimoto. They are accused of aiding the scheme.Wey's 40 Wall Street office was raided by the Federal Bureau of Investigation in 2012.
His attorney, David Siegel, told the Post: "Mr Wey denies the charges against him and looks forward to clearing his name."
Siegel did not address the accusations in the 2011 Carnes report.
Lawyers for the civil defendants either declined to comment or did not return calls seeking comment.
Wey made headlines in June when a US federal jury ordered him to pay US$18 million to an ex-employee, a Swedish former model, for sexual harassment and defamation.
Wey also ran a blog, The Blot, on which he would attack his critics, as well as journalists, who questioned the performance at Chinese companies he was promoting The blog's slogan? "Never Be Boring".
Reuters and Bloomberg
