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U.S. authorities arrested the chief executive of a New York investment firm
on Thursday for engineering so-called Chinese "reverse mergers" and then
manipulating stock prices to earn tens of millions of dollars in illegal
profits.
Benjamin Wey, the head of New York Global Group, was taken into custody at
his Manhattan home and was expected in federal court later on Thursday.
The office of U.S. Attorney Preet Bharara in Manhattan charged Wey and his
banker in Switzerland, Seref Dogan Erbek, with conspiracy, securities fraud
and other crimes.
Wey, 43, made headlines in June when a federal jury ordered him to pay $18
million to a former employee for sexual harassment and defamation.
According to an indictment unsealed on Thursday, Wey hid his control of U.S.
companies traded over-the-counter by using family members and New York
Global Group employees to obtain shares.
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 the 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.
The U.S. companies were SmartHeat Inc, Deer Consumer Products Inc and
CleanTech Innovations Inc, the indictment said.
Wey manipulated the stock prices by causing two brokers to solicit customers
to buy shares while discouraging sales, the indictment alleged. In addition
, Wey instructed Erbek, who directed trades for Wey's relatives and other
shareholders, to ensure the price remained high so he could later sell at a
profit, prosecutors said.
Wey's attorney, David Siegel, said, "Mr. Wey denies the charges against him
and looks forward to clearing his name."
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.
Lawyers for the civil defendants either declined to comment or were not
immediately available.
The Federal Bureau of Investigation raided New York Global Group's offices
in 2012.
In addition to promoting reverse mergers, Wey is known for attacking his
critics. In the sexual harassment case, former employee Hanna Bouveng
accused Wey of using his online magazine, The Blot, to publish disparaging
articles.
Wey faces at least two other defamation lawsuits linked to online articles.
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