Three people suspected of insider trading and disclosing illegal information in one of the most notorious price-rigging activities in China's stock market have been prosecuted.
Luo Gaofeng and Chen Yuxing, former employees of Shanghai-listed construction company Hangxiao Steel Structure, and veteran stock gambler Wang Xiangdong were formally charged by a local procuratorate in East China's Zhejiang Province on Monday, for "illegal activities" with the company's shares and generating earnings totaling 40.73 million yuan.
Shares catapulted the previously little known company to instant stock market stardom, on the back of a 34.4 billion yuan construction and engineering project for public housing in Angola earlier this year before it aroused the attention of the securities regulator.
China Securities Regulatory Commission began investigating in April and fined the company and its executives 700,000 yuan.
The maximum punishment under Chinese law could be 10 years' imprisonment and fines of up to five times the illegal earnings.
The local prosecutor told Chinese media that Hangxiao reached a consensus on February 8 with the Hong Kong-based China International Fund (CIF) for the Angola public housing project, a contract the two sides started negotiating in November 2006, with an estimated value of 30 billion yuan.
Three days later, Chen, who had just resigned from the director's post at Hangxiao's securities affairs office, learned of the project from company executives and instructed his alleged accomplice Wang to purchase about 2.8 million shares in the company.
Under the instruction of Chen, who obtained further information about the Angola project from Luo - then serving as the securities affairs representative at Hangxiao - Wang allegedly bought millions more shares in Hangxiao in the coming days before dumping all his nearly 7 million shares on March 15, when the pair heard the regulator would intervene.
(China Daily December 5, 2007)