China Securities Regulatory Commission Issued A Fine Of 510 Million Yuan! The Chairman Manipulated His Own Stock Price

China Securities Regulatory Commission issued a fine of 510 million yuan! The chairman manipulated his own stock price and made a profit of more than 80 million yuan! Behind the "trilogy" of market manipulation is

Among the 20 typical illegal cases of 2020 securities regulatory inspection announced by the CSRC recently, there was a typical case that the actual controller of a listed company manipulated the stock price of the company, and was eventually fined 510 million yuan. What illegal acts are behind this case?

The chairman manipulated his stock price to gain more than 80 million yuan, and the CSRC fined 510 million yuan

In 2011, Wu lianmo held shares of the listed company "kairuide" through Zhejiang fifth quarter Industrial Co., Ltd., which was held by himself, and became the actual controller and chairman of kairuide after the equity change.

SFC investigator: when Wu lianmo was the actual controller of the chairman of kairuide, he did not concentrate on the main business, but took the company as a tool for his personal interests.

During the period from August 5, 2014 to June 25, 2015, Shenzhen Stock Exchange monitored the abnormal stock price of kairuide, a listed company. Subsequently, the SFC conducted a formal investigation on kaireid.

According to the investigation conducted by the CSRC, Wu lianmo had met a group of old "traders" such as Xianyan and Luo Shangdong who had been punished by the CSRC, banned from the market or even sentenced by the judicial authorities. After learning the techniques of market manipulation, Wu lianmo manipulated the stock price of kairuide in three steps and made profits

In the first step, he borrowed 1.25 billion yuan from Xianyan, divided into 36 accounts from August 5 to September 29, 2014, and concentrated on "buying more and selling less" on 37 trading days of 39 trading days. Finally, the account group held 8 million shares of "kairuide", accounting for 4.87% of the total share capital of the shares.

In the second step, Wu lianmo, as the actual controller at that time, pushed up the share price by controlling the listed companies to release favorable information and cooperating with the secondary market transactions. During the period from September 30, 2014 to March 25, 2015, Wu lianmo controlled Kairui to release favorable information on the acquisition of new topics such as Internet lottery, Internet finance, fund business, etc., and used the account group to continuously trade and reverse to raise the stock price.

In the third step, Wu lianmo controlled the account group to reduce the position and sell "kairuide", and released favorable information to maintain the share price during the reduction period. Kaireid signed the acquisition agreement with Dongfang Caiyun on April 1, 2015, but the news was delayed. It was not until more than a month later that Wu lianmo began to reduce the position and sell, and then released the news to stabilize the stock price by controlling the release time of the information.

Through the above "trilogy" of market manipulation, the stock price of "kaireid" rose from 7.79 yuan on August 4, 2014 to 24.15 yuan on June 25, 2015, with a cumulative increase of 210.01%. During this period, the stock price of "kaireid" reached the historical highest price of 43.50 yuan, and Wu lianmo finally made a profit of more than 85 million yuan.

Investigators of the CSRC: in the end, we will impose a fine of five (510 million yuan) on him, which will serve as a warning to the market.

Be careful to avoid investigation and hard evidence

The case of carride is a typical case in which the real controller manipulates the stock price of the company. The actual controller Wu lianmo controls the use of the capital allocation account in a large amount, which brings great difficulties to the investigators.

Among the 36 accounts manipulated by Wu lianmo, 33 borrowed the capital allocation account of sub warehouse software, and the control relationship was hidden. In addition, due to the shutdown of the sub warehouse software at the time of investigation, it further increased the difficulty of obtaining evidence.

SFC investigator: in the later stage, we also carried out demonstration and evidence collection through various dimensions, including the comparison of funds, including the statements provided by us from the financing party.

Finally, the investigators restored Wu lianmo's market manipulation method. As the case involved the verification of multiple information release of listed companies, the investigators went to all parts of the country for conversation and evidence collection.

SFC investigator: in order to avoid our investigation, Wu lianmo and many of his partners chose to be some companies in Xinjiang. We went to Aksu in Xinjiang as far as possible, and went to Hainan Island in the south.

* ST Carey's stock price plummeted, financial indicators triggered new delisting standards

When Wu lianmo manipulated the share price of Kairui, the company continuously released good news about its transformation to lottery business, fund business and Internet finance. However, according to the investigation of the Securities Regulatory Commission, kairuide did not actively promote the relevant matters, and some of them were terminated or cancelled one after another. The company's operating conditions continued to deteriorate and suffered serious losses. On the evening of January 29, St Carey released its 2020 annual report, and financial indicators triggered new delisting standards.

On the evening of January 29, 2021, St Carey released its 2020 annual report. In 2020, the company achieved a revenue of 26.5137 million yuan and a net profit loss of 202 million yuan, a year-on-year decrease of 2470.71%. Compared with the new delisting rules, the company's deduction of non-profit is negative, and the main business income is less than 100 million yuan, and the "delisting risk warning" will be implemented. On January 30, Trident Holdings Co., Ltd. issued a warning to investors that the company's stock trading was subject to delisting risk warning and superimposed with other risk warnings. St Carey's trading was suspended for one day on February 1, and the stock abbreviation was changed from "St Carey" to "* ST Carey". In fact, the stock price of * ST Carey fell all the way, from the highest of 43.5 yuan per share during Wu lianmo's manipulation period to the latest stock price of 3.68 yuan before the suspension of trading on February 1, with a market value of only 648 million yuan.

SFC investigator: I feel very deeply about this. I think it will be sooner or later for the listed companies to decline if they do not operate at ease and do not engage in the main business.

In August 2019, the Supreme People's court and the Supreme People's Procuratorate jointly issued the criminal judicial interpretation of market manipulation, further refining and clarifying the constituent elements of market manipulation crime and the standard of punishment. Through strict legal responsibility investigation, the violators will pay the necessary illegal cost and further maintain the order of the securities market.

Tian Lihui, Dean of the Institute of financial research, Nankai University: the publication of typical illegal behaviors in the market plays a stronger deterrent role, and gradually develops China's value investment system, so as to serve the real economy.