Star fund man­ager pleads guilty to ma­nip­u­la­tion

China Daily (Hong Kong) - - TOP NEWS - By WU YIYAO in Shang­hai and CAI XIAO in Bei­jing and XIE CHUANJIAO in Qing­dao wuyiyao@chi­nadaily.com.cn

Xu Xiang, a for­mer hedge fund man­ager, has pleaded guilty to mar­ket ma­nip­u­la­tion, ac­cord­ing to a state­ment by a court in Qing­dao on Tues­day. It is one of the most high profile cases since China’s stock mar­ket col­lapse last year.

Qing­dao In­ter­me­di­ate Peo­ple’s Court said that Xu and two co-de­fen­dants were ac­cused of con­spir­ing with ex­ec­u­tives or oth­ers with fi­nan­cial con­trol of 13 listed com­pa­nies from 2010 to 2015 to ma­nip­u­late share prices and trad­ing vol­ume by us­ing in­sider in­for­ma­tion. The high­fly­ing Xu was pre­vi­ously known as “hedge fund brother No 1”.

Xu also was ac­cused of us­ing the in­for­ma­tion to di­rect the stock trades of some 100 peo­ple.

The court said it will an­nounce a ver­dict on an­other day

Xu was ar­rested in Novem­ber 2015 af­ter po­lice started a na­tion­wide probe into il­licit be­hav­ior in the stock mar­ket, in­clud­ing in­sider trad­ing, share price ma­nip­u­la­tion and ma­li­cious short sell­ing.

Po­lice froze over $1 bil­lion in shares of listed com­pa­nies with con­nec­tions to Xu’s in­vest­ments, ac­cord­ing to ex­change fil­ings.

Xu’s Zexi In­vest­ment Man­age­ment Co, a Shang­haibased firm es­tab­lished in 2009, man­aged four of China’s top 10 per­form­ing hedge funds in the first three quar­ters of last year, ac­cord­ing to simuwang.com, a pri­vate ven­ture in­for­ma­tion plat­form.

The av­er­age re­turn of Zexi’s five stock funds has ranked among China’s top three every year since the firm opened five years ago, and yielded gains of 249 per­cent when com­par­ing prices in Jan­uary and in Septem­ber of 2015.

The bench­mark Shang­hai Com­pos­ite In­dex ad­vanced by only 5.6 per­cent when com­par­ing those months, which span the sum­mer mar­ket tur­moil that year, ac­cord­ing to mar­ket in­tel­li­gence provider Tonghuashun.

The court’s state­ment said the nearly 100 peo­ple whose stock ac­counts Xu is ac­cused of in­flu­enc­ing il­le­gally be­tween 2009 and 2015 in­cluded his fam­ily mem­bers, em­ploy­ees and em­ploy­ees’ rel­a­tives.

Be­tween 2010 and 2015, Xu, ei­ther alone or with the two co-de­fen­dants, is ac­cused of mak­ing trades to ma­nip­u­late prices and trad­ing vol­umes af­ter buy­ing low from in­sid­ers of the 13 listed com­pa­nies t .hrough block trades, or through buy­ing low be­fore dis­clo­sures of im­por­tant news such as div­i­dends and prof­its, or be­fore dis­clo­sure of pri­vate place­ments of stock. He would then sell when prices rose, the court said.

The ex­ec­u­tives of 13 com­pa­nies in­volved in the case have been charged sep­a­rately, the court said.

PRO­VIDED TO CHINA DAILY

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