ChinaCast Execs Accused of Giant Fraud
MANHATTAN (CN) - Two top executives of ChinaCast Education Corp., a U.S. company, conspired to steal $40 million from its IPO and diverted another $30 million from it, the SEC claims in court.
The SEC sued ChinaCast's former CEO Chan Tze Ngon and its former president of Chinese operations, Jiang Xiangyuan, in Federal Court.
The men's chicanery caused the market capitalization of ChinaCast to drop from more than $200 million to less than $5 million, the SEC says in the lawsuit.
"In December 2009, Chan misappropriated $41 million out of the $43.8 million raised by ChinaCast in a secondary public offering by transferring the offering proceeds to a purported ChinaCast subsidiary in which Chan secretly held a controlling 50 percent ownership stake and, from there, to another entity outside ChinaCast's control," according to the SEC complaint. "In 2010 and 2011, Chan also secretly pledged approximately $30,360,000 of ChinaCast subsidiaries' assets to secure the debts of entities unrelated to ChinaCast. At least $30 million, and possibly as much as almost $80 million, of the pledged assets were ultimately lost to creditors' claims when the third parties defaulted on their debts. ...
"Jiang's insider trading was equally brazen. Jiang headed ChinaCast's operations in the PRC and, in March 2012, he avoided over $200,000 in losses by selling 51,135 shares of ChinaCast stock at $4.59 per share after participating in the transfer of one of ChinaCast's revenue-generating colleges to himself and before that transfer was publicly disclosed by a new management team. Jiang was terminated the day after his stock sale by a new board of directors that was seated following a proxy contest in which Chan lost control of the board."
The SEC seeks disgorgement, civil penalties and injunctions.