The Securities and Exchange Commission has charged eight people with fraud in a global, $33-million pump-and-dump scheme involving Chinese companies that went public in the U.S. through reverse mergers.
The defendants include Francis A. Tribble, a U.S. citizen and stock promoter; How Wai Hui (a.k.a. John Hui), a dual citizen of Hong Kong and Canada and the former chief executive of China World Trade Corp.; Kwong-Chung Chan (a.k.a. Bernard Chan), a citizen and resident of Hong Kong and the former chief financial officer of China World Trade Corp. and Gregg M.S. Berger, a stockbroker from New York.
According to the SEC’s complaint
, they participated in a scheme to pump up the share price and trading volume of a handful of small public companies through spam emails that touted nonexistent acquisitions, made unrealistic representations about the companies’ business prospects and included baseless share price projections. At the same time they were touting the stocks, the defendants were dumping shares through nominee brokerage accounts, reaping millions in profits.
The SEC says Tribble masterminded the pump-and-dump schemes involving the shares of at least five companies — China World Trade; Pingchuan Pharmaceuticals Inc.; Worldwide Biotech and Pharmaceuticals Inc. (OTCBB: WWBP.OB); China Digital Media Corp. (OTCBB: CDGT.OB); and China Mobility Solutions Inc. (Pink Sheets: GPPL.PK).
Berger, who was a friend of Tribble’s, facilitated the sales of the securities. Hui and Chan aided the scheme, the agency says, by finding public shells in the U.S. to use in taking Chinese companies public. “They arranged for the deposit and sale of stock through nominee brokerage accounts, and coordinated the transfer of the unlawful trading proceeds to pay for the spam e-mail campaigns among other things,” the agency said in a press release.
Along with four corporate insiders accused of participating in the schemes and trying to hide the sales of millions of shares in their companies, the agency also charged China Digital, Global Peopleline Telecom Inc. (the former China Mobility), and m-Wise Inc., another microcap company allegedly used as a vehicle for the pump-and-dump activities.
Tribble, Hui and China Digital have agreed to settle the charges against them. They’ll pay fines and have to disgorge illegal profits, according to the agency. They’re also barred from the penny stock industry.
Berger, meanwhile, is also facing a criminal indictment for conspiracy to commit wire and securities fraud. Hui and Tribble have already been sentenced to 51 months each in prison in related criminal cases.