Investment manager settles insider trading charges

Michael P. Tremoglie Jul. 31, 2012, 10:30am

NEW YORK (Legal Newsline) - New York-based investment manager Peter Siris on Monday settled charges brought by the Securities and Exchange Commission related to his activities with a Chinese reverse merger company, China Yingxia International.

According to the SEC announcement, Siris, an active investor in Chinese companies and former newspaper money columnist, allegedly misled investors in his two hedge funds through which he invested $1.5 million in China Yingxia. He understated his involvement with the company, particularly after it went out of business, and engaged in insider trading, the SEC claims.

Siris also received shares from the China Yingxia CEO's father and improperly sold them without any registration statement in effect, the SEC claims.

Siris and his firms will pay more than $1.1 million to settle the SEC's charges. The SEC also separately charged five individuals and one firm with securities law violations related to China Yingxia.

"Siris operated by his own set of rules in his dealings with China Yingxia and other Chinese issuers," said Andrew M. Calamari, Acting Director of the SEC's New York Regional Office.

"He was the go-to person when Chinese reverse merger companies wanted to raise capital or needed advice about operations, but he used his prominence and reputation in this area to illegally game the system to his advantage."

According to the complaint filed in federal court for the Southern District of New York, Siris and his firms (Guerrilla Capital Management LLC and Hua Mei 21st Century LLC) became involved with China Yingxia in 2007 and their misconduct continued until 2010.

The SEC alleges "that in February and March 2009, Siris sold China Yingxia stock while in possession of material, nonpublic information about problems at China Yingxia that he learned directly from the CEO. This confidential information included that she had engaged in illegal fundraising activities in China and that a company factory had shut down. Siris immediately began selling hundreds of thousands of shares of China Yingxia stock prior to any public disclosure by China Yingxia about these issues. Siris learned additional material, nonpublic information during the late afternoon of March 3, 2009, when he received a draft press release and notice that China Yingxia planned to publicly disclose the problems. Siris increased his orders to sell over the next couple of days before China Yingxia issued its press release publicly on March 6. Siris, through his funds, sold 1,143,660 China Yingxia shares in a matter of weeks for ill-gotten gains of approximately $172,000."

The SEC also charged the following with securities law violations related to China Yingxia:

-Ren Hu - China Yingxia's former CFO who is accused of making fraudulent representations in Sarbanes-Oxley certifications and other violations;

-Peter Dong Zhou - for insider trading and unregistered sales of securities and aided and abetted unregistered broker-dealer activity while assisting China Yingxia with its reverse merger and virtually all of its public company tasks. Zhou agreed to pay $20,900 in disgorgement, $2,463.39 in prejudgment interest, and a penalty of $50,000;

-Alan Sheinwald and his investor relations firm Alliance Advisors LLC -retained as "consultants" to China Yingxia and allegedly acted as unregistered securities brokers while raising money for China Yingxia and at least one other issuer;

-Steve Mazur - allegedly acted as an unregistered securities broker while selling away from his firm the securities of China Yingxia and one other issuer. Without admitting or denying the charges, Mazur agreed to pay $126,800 in disgorgement, $25,550.01 in prejudgment interest and a penalty of $25,000. He agreed to a two-year collateral bar, penny stock bar, and investment company bar; and

James Fuld, Jr. - allegedly involved in the unregistered sales of securities. Without admitting or denying the charges, he agreed to pay $178,594.85 in disgorgement and $38,096.70 in prejudgment interest.

Calamari said, "With these charges, the SEC continues to make good on its commitment to hold accountable those who enable some Chinese reverse merger firms to take unfair advantage of investors in the U.S. capital markets."

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