Hedge Fund Manager to Pay $44 Million for Illegal Trading in Chinese Bank Stocks; 2012-264; December 12, 2012 http://www.sec.gov/news/press/2012/2012-264.htm[15-Dec-2012 11:57:55] Home | Previous Page Hedge Fund Manager to Pay $44 Million for Illegal Trading in Chinese Bank Stocks FOR IMMEDIATE RELEASE 2012-264 Washington, D.C., Dec. 12, 2012 — The Securities and Exchange Commission today charged the manager of two New York-based hedge funds with conducting a pair of trading schemes involving Chinese bank stocks and making $16.7 million in illicit profits. He and his firms have agreed to pay $44 million to settle the SEC’s charges. Additional Materials SEC Complaint The SEC alleges that Sung Kook “Bill” Hwang, the founder and portfolio manager of Tiger Asia Management and Tiger Asia Partners, committed insider trading by short selling three Chinese bank stocks based on confidential information they received in private placement offerings. Hwang and his advisory firms then covered the short positions with private placement shares purchased at a significant discount to the stocks’ market price. They separately attempted to manipulate the prices of publicly traded Chinese bank stocks in which Hwang’s hedge funds had substantial short positions by placing losing trades in an attempt to lower the price of the stocks and increase the value of the short positions. This enabled Hwang and Tiger Asia Management to illicitly collect higher management fees from investors. In a parallel action, the U.S. Attorney’s Office for the District of New Jersey today announced criminal charges against Tiger Asia Management. “Hwang today learned the painful lesson that illegal offshore trading is not off-limits from U.S. law enforcement, and tomorrow’s would-be securities law violators would be well-advised to heed this warning,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. Sanjay Wadhwa, Associate Director of the SEC’s New York Regional Office and Deputy Chief of the Enforcement Division’s Market Abuse Unit, added, “Hwang betrayed his duty of confidentiality by trading ahead of the private placements, and betrayed his fiduciary obligations when he defrauded his investors by collecting fees earned from his attempted manipulation scheme.” The SEC also charged Raymond Y.H. Park for his roles in both schemes as the head trader of the two hedge funds involved – Tiger Asia Fund and Tiger Asia Overseas Fund. Park, who lives in Riverdale, N.Y., also agreed to settle the SEC’s charges. Hwang lives in Tenafly, N.J. According to the SEC’s complaint filed in federal court in Newark, N.J., from December 2008 to January 2009, Hwang and his advisory firms participated in two private placements for Bank of China stock and one private placement for China Construction Bank stock. Before disclosing material nonpublic information about the offerings, the placement agents required wall-crossing agreements from Park and the firms to keep the information confidential and refrain from trading until the transaction took place. Despite agreeing to those terms, Hwang ordered Park to make short sales in each stock in the days prior to the private placement. Hwang and his
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Hedge Fund Manager to Pay $44 Million for Illegal Trading in Chinese Bank Stocks; 2012-264; December 12, 2012
Hedge Fund Manager to Pay $44 Million for IllegalTrading in Chinese Bank Stocks
FOR IMMEDIATE RELEASE2012-264
Washington, D.C., Dec. 12, 2012 — The Securities and ExchangeCommission today charged the manager of two New York-based hedgefunds with conducting a pair of trading schemes involving Chinese bankstocks and making $16.7 million in illicit profits. He and his firms haveagreed to pay $44 million to settle the SEC’s charges.
Additional MaterialsSEC Complaint
The SEC alleges that Sung Kook “Bill” Hwang, the founder and portfoliomanager of Tiger Asia Management and Tiger Asia Partners, committedinsider trading by short selling three Chinese bank stocks based onconfidential information they received in private placement offerings. Hwangand his advisory firms then covered the short positions with privateplacement shares purchased at a significant discount to the stocks’ marketprice. They separately attempted to manipulate the prices of publicly tradedChinese bank stocks in which Hwang’s hedge funds had substantial shortpositions by placing losing trades in an attempt to lower the price of thestocks and increase the value of the short positions. This enabled Hwangand Tiger Asia Management to illicitly collect higher management fees frominvestors.
In a parallel action, the U.S. Attorney’s Office for the District of New Jerseytoday announced criminal charges against Tiger Asia Management.
“Hwang today learned the painful lesson that illegal offshore trading is notoff-limits from U.S. law enforcement, and tomorrow’s would-be securitieslaw violators would be well-advised to heed this warning,” said RobertKhuzami, Director of the SEC’s Division of Enforcement.
Sanjay Wadhwa, Associate Director of the SEC’s New York Regional Officeand Deputy Chief of the Enforcement Division’s Market Abuse Unit, added,“Hwang betrayed his duty of confidentiality by trading ahead of the privateplacements, and betrayed his fiduciary obligations when he defrauded hisinvestors by collecting fees earned from his attempted manipulationscheme.”
The SEC also charged Raymond Y.H. Park for his roles in both schemes asthe head trader of the two hedge funds involved – Tiger Asia Fund andTiger Asia Overseas Fund. Park, who lives in Riverdale, N.Y., also agreed tosettle the SEC’s charges. Hwang lives in Tenafly, N.J.
According to the SEC’s complaint filed in federal court in Newark, N.J., fromDecember 2008 to January 2009, Hwang and his advisory firms participatedin two private placements for Bank of China stock and one privateplacement for China Construction Bank stock. Before disclosing materialnonpublic information about the offerings, the placement agents requiredwall-crossing agreements from Park and the firms to keep the informationconfidential and refrain from trading until the transaction took place.Despite agreeing to those terms, Hwang ordered Park to make short salesin each stock in the days prior to the private placement. Hwang and his
firms illegally profited by $16.2 million by using the discounted privateplacement shares they received to cover the short sales they had enteredinto based on inside information about the placements.
The SEC further alleges that on at least four occasions from November2008 to February 2009, Hwang and his firms, with Park’s assistance,attempted to manipulate the month-end closing prices of Chinese bankstocks publicly listed on the Hong Kong Stock Exchange. These stocks wereamong the largest short position holdings in the hedge funds’ portfolios. Themore assets the hedge funds had under management, the greater themanagement fee that Tiger Asia Management was entitled to collect. SoHwang directed Park to place losing trades in order to depress the stockprices, which would inflate the calculation of the management fees. Hwangand Tiger Asia Management made approximately $496,000 in fraudulentmanagement fees through this scheme.
The SEC’s complaint charges Hwang, his firms, and Park with violations ofSection 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 aswell as Section 17(a) of the Securities Act of 1933. Hwang and his firmsalso are charged with violating Sections 206(1), 206(2), and 206(4) of theInvestment Advisers Act of 1940 and Rule 206(4)-8, and Park is chargedwith aiding and abetting those violations.
The settlements, which are subject to court approval, require Hwang, TigerAsia Management, and Tiger Asia Partners to collectively pay $19,048,787in disgorgement and prejudgment interest — including $16,257,918 thatTiger Asia Management will pay directly to criminal authorities. Each ofthem has agreed to pay a penalty of $8,294,348 for a grand total of $44million. Park agreed to pay $39,819 in disgorgement and prejudgmentinterest, and a penalty of $34,897. With the exception of Tiger AsiaManagement, the defendants neither admit nor deny the charges.
The SEC’s investigation was conducted by Thomas P. Smith, Jr., SandeepSatwalekar, and Amelia A. Cottrell of the SEC’s Market Abuse Unit in NewYork, and Frank Milewski of the New York Regional Office. The SECappreciates the assistance of the U.S. Attorney’s Office for the District ofNew Jersey, the Federal Bureau of Investigation, the Internal RevenueService, the Japanese Securities and Exchange Surveillance Commission,and the Hong Kong Securities and Futures Commission.
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The SEC has filed more than 175 insider trading actions since October 2009charging more than 400 individuals and entities. The defendants in theseactions are alleged to have made more than $905 million in illicit gainscomprised of profits and avoidance of losses.
Sanjay Wadhwa Attorney for Plaintiff SECURITIES AND EXCHANGE COMMISSION New York Regional Office 3 World Financial Center, Suite 400 New York, NY 10281-1022 (212) 336-0181
UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
-against- COMPLAINT
TIGER ASIA MANAGEMENT, LLC, TIGER ASIA PARTNERS, LLC, SUNG KOOK (a/k/a BILL) HWANG,
and RAYMOND Y.H. PARK
ECFCASE
Defendants.
Plaintiff Securities and Exchange Commission ("Commission"), for its Complaint
against defendants Tiger Asia Management, LLC ("Tiger Management"), Tiger Asia
Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and Sections 206(1), 206(2), and 206(4)
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ofthe Advisers Act [15 U.S.C. §§ 80b-6(1), (2), and (4)] and Rule 206(4)-8 thereunder
[17 C.F.R. § 275.206(4)-8];
II.
Ordering defendants Hwang, Tiger Management, Tiger Partners and Park to
disgorge, with prejudgment interest, all ill-gotten gains received as a result of the conduct
alleged in this Complaint.
III.
Ordering defendants Hwang, Tiger Management, Tiger Partners and Park to pay
civil monetary penalties pursuant to Section 21A of the Exchange Act [15 U.S.C. § 78u
1] or Section 209(e) ofthe Advisers Act [15 U.S.C. § 80b-9(e)]; and
IV.
Granting such other and further relief as this Court may deem just and proper.
Dated: December 12, 2012 New York, New York
Associate Regional Director Attorney for Plaintiff SECURITIES AND EXCHANGE COMMISSION New York Regional Office 3 World Financial Center, Suite 400 New York, New York 10281-1022 (212) 336-0181 [email protected]