WASHINGTON (AP) -- Investors including an executive of AutoChina International Ltd. placed fraudulent trades to create the false impression that the stock is traded more actively, federal securities regulators said Wednesday.
The Securities and Exchange Commission said the China-based company and 11 investors made hundreds of false trades starting in October 2010, using more than $60 million that had been deposited into U.S. brokerage accounts.
Their goal was to boost the stock's trading volume, the SEC said. It said AutoChina had faced trouble securing a stock-backed loan because of the stock's low trading volume.
AutoChina said in a statement that the suit lacks merit and it will defend against the claims vigorously. AutoChina said all of the evidence it is aware of contradicts the SEC's allegations.
The SEC said the bad trades included matched orders, where one account sold shares to another account at the same time and for the same price. They also included wash trades which resulted in no change of beneficial ownership of the shares, it said.
In the three months before the defendants opened their U.S. brokerage account, about 18,000 shares of AutoChina stock changed hands each day, the SEC said. Afterwards, average volume rose to more than 139,000 shares, it said.
The defendants and related accounts made up as much as 70 percent of the stock's trades, according to the SEC's complaint, filed in the U.S. District Court in Massachusetts.
Among the defendants is AutoChina senior executive and director Hui Kai Yan, a former manager with the company.
The SEC has been investigating Chinese companies that trade in the U.S. — there are hundreds of them — and their accounting practices. The agency also has been looking to expand its oversight of the companies.
