Lawyer says case may be settled with regulator
Liu Yannan, CEO of Internet financing firm Meili, on Wednesday denied charges by the U.S. Securities and Exchange Commission (SEC) that he was involved in insider trading in the U.S.
Liu and a colleague, Zhou Zhichen, were accused of insider trading in the securities of two companies - MedAssets Inc and Chindex International Inc - an SEC statement said on Tuesday (U.S. time).
According to the SEC, Zhou made "well-timed trades" around the acquisition announcements of the two companies and generated profits of more than $300,000 via information and funds provided by Liu.
But when contacted by the Global Times on Wednesday, Liu denied that he had given any information or funds to Zhou.
"There is some misunderstanding," Liu said, noting that he had hired a lawyer in the US and has been communicating with the SEC.
Efforts to reach Zhou failed on Wednesday.
Meili, based in Beijing, is not involved in the SEC case.
NASDAQ-listed MedAssets announced on November 2 that it would be acquired by investment firm Pamplona Capital Management. Zhou made "highly suspicious purchases" of MedAssets common stock before the announcement and sold all his holdings in the company after the acquisition, which had sent the company's shares soaring, according to the SEC.
In February 2014, healthcare firm Chindex announced that it would be acquired by an affiliate of a private equity consortium that included TPG Capital. Zhou also made profits in a similar way, the SEC said.
Liu used to work for TPG, which was involved in both acquisitions, as TPG was also a bidder for MedAssets, the SEC noted.
Liu was the founder and CEO of peer-to-peer lending firm yooli.com, but he left the firm in August. Zhou used to work for yooli.com, but he is now working at Liu's new firm Meili, according to media reports.
The SEC claimed that Zhou is Liu's cousin, but Liu said Wednesday that they are merely colleagues.
The case involving Liu and Zhou is not unique. Two Chinese nationals were accused of insider trading in April when they made profits from trades of the shares in life services provider 58.com, which announced a merger with its rival ganji.com earlier that month. That announcement sent its share price surging. The two Chinese investors agreed to settle with the SEC in September by paying a fine of around $2.77 million.
"To reach such a settlement with the SEC is a very common solution for such cases," said Hao Junbo, a lawyer at Beijing-based Hao Law Firm, noting that this tactic could avoid further penalties for the defendants and a more efficient solution for the SEC.
Hao said that irregularities like insider trading are common in capital markets and the Chinese authorities should intensify scrutiny in this regard to protect the interests of retail investors.
