SEC Announces Insider Trading Charges Linked to China Tech Deal; SEC alleged two Beijing residents bought out-of-the-money call options before deal was announced
NED LEVIN
April 30, 2015 1:09 a.m. ET
The U.S. Securities and Exchange Commission announced insider trading charges against two Beijing residents on Wednesday, alleging they purchased stock options ahead of Chinese e-commerce company 58.com’s purchase of a $1.6 billion minority stake in rival Ganji.com.
The regulator said a court had granted its request to freeze assets in the U.S. brokerage accounts of Xia Xiaoyu and Hu Yanting. The SEC alleged the two bought out-of-the-money call options, or bets that the stock price of a company will go up, in New York-listed 58.com after the deal was signed but before it was announced. The SEC said Mr. Xia and Ms. Hu had profited by more than $2 million through their purchase of the options. 58.com’s stock surged by 34% after it was initially reported that the two companies would agree to a deal.Its investment in Ganji.com was formally announced on April 17th, along with an additional $400 million investment in 58.com by Chinese tech giant Tencent HoldingsLtd.
58.com and Ganji.com are often compared with the U.S.’s Craigslist.
The SEC didn’t disclose further details on the identities of Mr. Xia or Ms. Hu besides saying that both are “connected to the financial industry in China.”
Reached by phone on Thursday, Xia Xiaoyu, an employee of investment firm Chinastone Capital Management in Beijing, confirmed that he was the person charged by the SEC but said he didn’t know who Hu Yanting was and declined to comment further.
Chinastone wasn’t mentioned in the SEC’s announcement. Li Shan, chairman and CEO of Chinastone, said the charges weren’t related to his company, and that Chinastone, which focuses on energy investments, had no positions in or involvement with 58.com or Ganji.com.
Ms. Hu couldn’t be reached for comment.
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