An indictment unsealed in Virginia’s eastern district charged “foreign actors” Lai Kui Sen and Yan Zhao in a “complex” securities fraud scheme that weaponized stock of publicly-traded NASDAQ (floor of the New York Stock Exchange on Wall Street seen in July in New York City) company Ostin Technology Group to allegedly target U.S. retail investors and net over $100 million in the process for the two defendants and at least 15 co-conspirators. File Photo by John Angelillo/UPI | License Photo
Two Chinese nationals could spend decades in jail for targeting U.S. investors in a predatory “pump-and-dump” scheme to allegedly rake in millions on artificially-inflated stock prices.
An indictment unsealed Thursday in Virginia’s eastern district charged “foreign actors” Lai Kui Sen and Yan Zhao in a “complex” securities fraud scheme that weaponized the stock of Ostin Technology Group Co. Ltd. from April to June to allegedly target American retail investors and net over $100 million in the process for the two defendants and at least 15 co-conspirators.
“Protecting the integrity of our financial markets remains a top priority,” Erik S. Siebert, U.S. attorney for the eastern district of Virginia, said Friday in a statement.
The Cayman Islands OST is a publicly-traded NASDAQ company with principal operations based in China.
Sen, OST’s co-CEO, and financial adviser Zhao allegedly “siphoned OST shares in non-bona fide securities transactions and then dumped their stock amidst a coordinated social media campaign to pump OST’s share price” via two specific transactions, according to federal officials.
Yan Zhao goes by several aliases, including Hank Shi and Hank Shu, officials said.
Officials added that in at least one transaction the two co-conspirators allegedly paid nothing to OST for more than 70 million OST stock shares, and on April 15 when select investors received a first dump of “heavily discounted” OST shares, a so-called “fraudulent campaign” began to “artificially inflate the price and trading volume” of OST’s stock value.
“Unwitting investors suffered significant losses when, on June 26, OST lost over $950 million in market capitalization, representing over 94% of its value,” the federal indictment read in part.
According to authorities, Zhao and Sen allegedly facilitated the illegal opening of multiple brokerage accounts for a handful of investors and processed to orchestrate the selling of shares they received at either a heavily discounted price or for no remuneration.
According to prosecutors, the sales generated a profit of more than $110 million.
So far, the DOJ has seized nearly $10 million in assets from accounts of the two co-conspirators.
Meanwhile, the SEC’s Office of Inspector General said it will “relentlessly” pursue investigation of individuals who submit false filings with the Securities Exchange Commission.
“Comprehensive investigative oversight to protect investors, the global markets, and the operational integrity of the SEC’s programs, systems, and operations is a top priority for our office,” said the SEC’s Inspector General Kevin Muhlendorf.
Last week, Virginia’s Siebert reiterated that the U.S. Department of Justice whistleblower program was created to “encourage corporations and individuals to come forward with timely information regarding misconduct and criminal behavior.”
Assistant Director Jose A. Perez of the FBI’s Criminal Investigative Division stated that securities fraud by foreign actor not only exploits fair investment practices, but also “defrauds American investors and harms U.S. markets.”
Zhao and Sen are charged with conspiracy to commit securities fraud and wire fraud, securities fraud and wire fraud.
“If you seek to manipulate U.S. markets for personal gain, the FBI will pursue you even if you’re operating halfway around the world,” Special Agent in Charge Reid Davis of the FBI Washington Field Office’s Criminal Division, added on Friday.
The two Chinese “foreign actors” face a maximum penalty of 20 to 25 years for some individual charges, with sentencing determined by a federal judge based on U.S. guidelines.
