Wall Street CEO Charged in Reverse Mergers

(CN) - New York Global Group founder Benjamin Wey was arrested Thursday morning and charged with securities fraud in connection with reverse mergers, the government said.

Manhattan U.S. Attorney Preet Bharara announced the unsealing of an indictment against Way and his Swiss banker Seref Dogan Erbek. Erbek remains at large, according to Bharara's office.

Wey, 43, is accused of illegally making tens of millions of dollars through reverse merger transactions between Chinese companies and U.S. shell companies by manipulating stock prices.

Reverse mergers involve private companies acquiring an ownership majority in a public shell company before merging the two entities. Wey violated federal securities laws by not disclosing his ownership of more than five perfect of stock in the new companies, according to the indictment.

"Ben Wey fashioned himself a master of industry, but as alleged, he was merely a master of manipulation," Bharara said in a statement. "The indictment charges that Wey used reverse merger transactions between Chinese companies and U.S. shell companies to illegally conceal his ownership interest and then, with the help of his alleged co-conspirator, manipulated the market so that he could sell his interest at artificially inflated prices."

Wey manipulated stock prices by causing two Manhattan brokers to solicit their customers to buy stock in the merged entities while at the same time discouraging customers to sell those stocks, thereby artificially maintaining the share prices, according to a government press release.

He also told Erbek, 53, to maintain the share prices of at least two of the new companies' stock held in accounts of entities owned by Wey's family members and employees of a Chinese branch of his company, New York Global Group, the government claims.

According to the press release, Erbek told Wey, "Obviously, we need to be careful to give such orders/make such comments. I may explain it over the phone; please call me if you have time."

Wey caused other shares to be sold at inflated prices while the stock prices were maintained, which generated millions of dollars, the indictment says. The government says the illegal profits paid for an apartment at the Ritz-Carlton Hotel in New York City's Battery Park neighborhood, among other purchases.

Wey is charged with securities fraud, wire fraud, money laundering and failure to disclose ownership in excess of five percent. If convicted on all counts, he could face more than 100 years in prison and a maximum fine of $5 million.

In addition to the criminal charges, the U.S. Securities and Exchange Commission filed civil charges against Wey and Erbek.

Wey also lost a civil sexual harassment and defamation case in June. A jury awarded a former employee $18 million in damages, according to a New York Times report.

Erbek's criminal charges include securities fraud, wire fraud and conspiracy. He could face up to 70 years in prison.

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