Stock Manipulators Arrested After USD2.9m in Illegal Profits

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Chinese authorities caught a gang that manipulated stock pricing through fraudulent orders with use of the Shanghai-Hong Kong Stock Connect, reported Yicai Global on August 9. Of the three suspects Shanghai police arrested, two were charged for stock market manipulation that netted profits of over RMB20m (USD2.9m). Led by a trader referred to as Mr. Tang, the gang selected stocks with a small market cap in order to better exploit share price fluctuations. They then placed fraudulent buy and sell orders to bid up prices, and then canceled the orders afterward to made profits by trading between each other.

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Fraudulent purchases in low market cap securities to profit through arbitrage is highly illegal. Previously, the China Securities and Regulatory Commission (CSRC) issued fines against the suspects for illegal trading activity. From 2012 through 2015, the group was accused of manipulating more than ten stocks in a similar manner. Mr. Tang then fled to Hong Kong to avoid being indicted. There, he continued engaging in illegal trading via securities accounts utilizing the Shanghai-Hong Kong Stock Connect to trade mainland-listed shares. Police investigators reported that on some trading days, more than 50% of cancellations through the stock connect were attributed to the other suspects who were proxies for Mr. Tang.

Brian P. Lee