Risk & Compliance

Banker Arrested For Illegally Profiting From Reverse Mergers

The banker allegedly helped Chinese companies arrange reverse mergers and then got them listed on Nasdaq by inflating shareholder numbers.
Katie Kuehner-HebertSeptember 11, 2015

Benjamin Wey, the head of an investment firm called New York Global Group, was arrested Thursday for allegedly earning tens of millions from manipulating stock prices on Chinese “reverse mergers.”

According to Reuters, the office of U.S. Attorney Preet Bharara in Manhattan charged Wey, 43, and his banker in Switzerland, Seref Dogan Erbek, with conspiracy, securities fraud, and other crimes. Erbek remains at large.

Through a Beijing-based subsidiary of his firm, prosecutors said, Wey offered to help Chinese companies seeking to raise U.S. capital by arranging reverse mergers, in which the Chinese companies took control of U.S. shell companies. Wey got the companies listed on Nasdaq by fraudulently inflating the number of shareholders and hiding his ownership interest from the exchange, authorities said.

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The U.S. companies involved were SmartHeat, Deer Consumer Products, and CleanTech Innovations, according to the indictment.

The U.S. Securities and Exchange Commission 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, accused of aiding the scheme. The SEC said that the reverse mergers were structured so that Wey and other family members “secretly obtained ownership interests of more than five percent of the newly listed companies.”

To avoid detection and evade SEC reporting requirements as beneficial owners, [Wey and other family members] divided their shares among a vast network of foreign accounts and generated tens of millions of dollars in illegal profits as they sold the securities into artificially inflated markets,” the SEC said. “The illicit profits eventually circled back to Wey and his wife, who used the money to finance a lavish lifestyle.”

“Mr. Wey denies the charges against him and looks forward to clearing his name” his attorney David Siegel told Reuters.

“The Weys and their attorneys went to extraordinary lengths to hide their scheme, but they underestimated our ability to piece it together,” said Antonia Chion, associate director of the SEC’s Division of Enforcement.