Wei Zhong and Regina Ding face fines for market manipulation in breach of the Financial Markets Conduct Act after the High Court ruled they organised phony on-market trades to prop up the market in shares for their now delisted Oceania Natural Ltd. Business acquaintances and Ding’s parents were used to set up pre-arranged buy/sell matched orders.
Oceania Natural listed on the then separate NXT board in 2016. It operated as an exporter, primarily manuka honey and Cook Island noni juice. Husband and wife, Zhong and Ding both hold MBA degrees from Singapore. He was executive director and chief executive officer for Oceania; she headed up sales and marketing. Their combined 61.6 per cent holding in Oceania Health at time of listing was valued at $10.2 million. Oceania is now in liquidation with unsecured creditors claiming $1.22 million.
The High Court was told of a series of on-market transactions through 2016 and 2017 having the effect of propping up Oceania’s share price.
Some involved use of ASB Securities customer accounts held in the separate names of Ding’s parents. Zhong traded on Ding’s father’s account, masquerading as her father to place orders. Zhong also made use of a phone registered to his five year old daughter in an attempt to muddy the trail. Ding traded on her mother’s account, posing as her mother. As is common custom in China, Ding’s parents do not share the same last name. ASB Securities came to suspect collusion when it realised matching buy/sell orders came from client accounts with near adjacent numbers and then twigged that the accounts were in the name of husband and wife: Ding’s parents. These two accounts were then suspended.
Evidence was also given of Zhong and Ding liaising with business associates to execute phony trades. The court was told of a repeated pattern seeing a series of short phone calls and WeChat messages from Zhong or Ding to business associates followed by matching buy/sell orders. These business associates were compensated for their costs.
Zhong’s and Ding’s enthusiasm in boosting the market price fell foul of trading rules; one buy order was not forwarded to the stock exchange because it would have had the effect of increasing the then market price by fourteen per cent in one trade. Buy/sell prices are expected to move incrementally.
All the matched trades had the effect of increasing the market price for Oceania’s shares.
Fines for Zhong’s and Ding’s market manipulation require a further court hearing.
Financial Markets Authority v. Zhong & Ding – High Court (6.04.23)
23.044
Post-judgment note: Zhong was subsequently ordered to pay a $1.33 million penalty; Ding $760,000.