MANHATTAN (CN) - Two hedge funds and two managers will pay $44 million to settle SEC charges of illegal trading in Chinese bank stocks, the SEC said.
The SEC sued Sung Kook "Bill" Hwang, founder and manager of co-defendants Tiger Asia Management and Tiger Asia Partners, and Raymond Y.H. Park, the head trader of the two hedge funds involved: Tiger Asia Fund and Tiger Asia Overseas Fund. Each company's name is abbreviated in the SEC's complaint, but Courthouse News uses the full name to avoid confusion with a similarly named company.
The U.S. attorney in Newark on Wednesday filed parallel criminal charges against Tiger Asia Management, the SEC said.
"This case involves insider trading and attempted manipulative trading by Hwang, the sole principal and portfolio manager of two unregistered funds advised by Tiger [Asia] Management and Tiger [Asia] Partners, and Hwang's head trader, Park," the SEC said in its 19-page federal complaint. "In December 2008 and January 2009, the defendants entered into 'wall-crossing' agreements for three private placements of Chinese bank stocks, subsequently violated the wall-crossing agreements by short-selling the Chinese bank stocks, and then covered these short positions with private placement shares purchased at a discount. This illegal trading resulted in profits to the funds advised by Tiger Management and Tiger Partners of approximately $16.2 million.
"Also, starting in November 2008 and continuing through February 2009, Hwang, Tiger [Asia] Management, and Tiger [Asia] Partners, aided and abetted by Park, misappropriated fund assets by placing losing trades in Chinese bank stocks in which the funds had substantial short positions, in an attempt to manipulate the price of these stocks at month's end to inflate the calculation of management fees. The attempted manipulative trading scheme earned Tiger [Asia] Management approximately $496,000 in fraudulent management fees."
Hwang, of Tenafly, N.J., and Park, of Riverdale, N.Y., agreed to settle the SEC said.
"The settlements, which are subject to court approval, require Hwang, Tiger Asia Management, and Tiger Asia Partners to collectively pay $19,048,787 in disgorgement and prejudgment interest," the SEC said in a statement announcing the settlement. "Each of them has agreed to pay a penalty of $8,294,348 for a total of $24,883,044. Park agreed to pay $39,819 in disgorgement and prejudgment interest, and a penalty of $34,897. With the exception of Tiger Asia Management, the defendants neither admit nor deny the charges."
On Dec. 12, U.S. District Judge Stanley Chesler signed a consent judgment that compels Tiger Asia Management to forfeit $16.2 million.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.