Malaysian regulator sues 10 in Iris share fraud

http://www.reuters.com/article/2008/04/09/iris-idUSKLR15551720080409

Posted by Latha Do NADARAJAN , Year 3 undergrad at the School of Accountancy, Singapore Management University

Malaysia’s market regulator has filed a landmark civil lawsuit against eight foreign parties and two Malaysians over alleged manipulation, rigging and fraud of Iris Corp (IRIB.KL) shares, the regulator said on Wednesday.

Iris, which makes electronic passports, was a darling of retail investors in 2006 when its shares soared 1,500 percent over eight months before regulators moved in to curb excessive speculation.

The Securities Commission said it sued, among others, U.S.-based hedge fund Aeneas Capital Management, and Priam Holdings Ltd, which ran Aeneas’ Malaysia-only Priam fund.

The fund was a major investor in Iris.

The regulator said the other foreign defendants were Aeneas Evolution Portfolio, Aeneas Portfolio Company, Acadian Worldwide Inc, Aeneas Capital Managing Partner Thomas Grossman, Aeneas Capital research analyst Richard Benjamin Cohen and Aeneas Capital Chief Operating Officer John Suglia.

It also named two Malaysians — Tan Mong Sing and Low Thiam Hock, who is popularly known as Repco Low — in the suit.

Low was the adviser for the Malaysian branch of Acadian Worldwide. Tan was the Malaysian representative of Acadian Worldwide.

“The civil enforcement approach enables the SC to seek various reliefs from the High Court including injunctions, compensation, restitution and declaratory orders,” it said.

In addition, the regulator also sanctioned two Malaysian brokerages and two dealers involved the case, it said.

In the suit filed in a Kuala Lumpur court on March 27, the commission sought a declaration that the defendants conspired to manipulate the market and share price of Iris, and defrauded investors.

It also sought a permanent injunction to restrain each of the defendants from trading in any stocks listed in the Malaysian stock exchange.

The regulator said the probe, which spanned several countries including the United States, Hong Kong and Singapore, involved tracing more than 200,000 e-mail messages and more than 100 trading accounts.

The investigation said that the manipulation was carried out through a complex layering of the origination of the orders and transactions via foreign intermediaries in several jurisdictions.

“The foreign defendants and their representatives worked closely with the Malaysian defendants in creating an artificial demand for Iris shares,” the regulator said

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