Chinese Stock Promoter Charged — Barron’s

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Federal prosecutors unsealed fraud and money-laundering charges on Thursday against Benjamin Wey, 43, a stock promoter who has been the subject of several Barron’s stories. Among them was a 2010 story about the dubious quality of many Chinese companies that were coming public on U.S. stock markets using “reverse-merger” deals to join with American shell companies that had been publicly traded (“Beware This Chinese Export,” Aug. 30, 2010). A decade or more ago, these China plays were hot investments and eagerly sought as listings by the New York Stock Exchange and Nasdaq. After a number of exposes, including ours, securities regulators filed dozens of civil fraud cases and other actions against the reverse-merged companies and the investment fad fizzled.

The indictment in Manhattan’s federal district court charged Wey, and the still-at-large Swiss-based banker Seref Dogan Erbek, with manipulating the share prices of companies like SmartHeat (ticker: HEAT), Deer Consumer Products (DEER), and CleanTech Innovations through trades among nominee accounts that controlled most of those companies’ free-trading shares in the names of Wey’s family and employees. The U.S. Securities and Exchange Commission also announced securities fraud charges against Wey, Erbek, Wey’s New York Global Group company, Wey’s wife, sister, and two lawyers.

If Wey is convicted on the criminal charges he could face up to 25 years and fines of double his allegedly illicit profits. In the indictment, the U.S. Attorney for the Southern District of New York, Preet Bharara, said Wey’s gains from the scheme amounted to tens of millions of dollars. Prosecutors allege Wey and his wife reported the laundered loot as untaxable gifts from a foreign person and used the money for an apartment at the Ritz-Carlton Hotel in the Battery Park neighborhood of downtown Manhattan.

Requests for comment to Wey’s lawyer went unanswered by press time. Barron’s was unable to reach the other defendants or their attorneys. Wey’s lawyer, David Siegal, told one publication last week that Wey denies the charges.

Barron’s writer Leslie P. Norton first sounded alarms seven years ago about Wey and China-based hog and feed producer AgFeed — subsequently liquidated (“AgFeed Trips on Its Way to the Trough,” May 19, 2008). In AgFeed’s ongoing bankruptcy case, the trustee alleged this summer that directors and auditors controlled by Wey all looked the other way while AgFeed’s fictitious hog farms reported almost a quarter of a billion dollars in fictitious revenues. Wey has not yet responded to those allegations. The new SEC case alleges that Wey and his family received more than $11 million in concealed payments from AgFeed and other clients. On just a handful of stock promotions, says the agency, Wey and his associates cleared $60 million.

After Nasdaq delisted CleanTech in December 2010, Wey and U.S. Sen. Arlen Specter appealed the action on the company’s behalf, accusing Nasdaq and Barron’s of racism against Chinese businessmen. They persuaded the SEC to overturn the delisting, and although CleanTech’s business came a cropper, the shell lived on by merging into a business now called 6D Global Technologies (SIXD).

Earlier this year,the financier became familiar to the readers of other New York tabloids as he fought and lost a civil suit in which an employee alleged he’d sexually harassed her. Wey has asked that case’s judge to overturn the jury’s verdict and $18 million judgment. Even after agents of the Federal Bureau of Investigation raided Wey’s apartment and business in 2012, he countered criticism with his own publicity campaign — styling himself as an investigative journalist and publishing disparaging pieces and images about critics on his Website, TheBlot.

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