Four accused of illicit trading in Gay Giano shares
The police have charged four people with allegedly manipulating the share price of Gay Giano International Group, leading to 20 brokers suffering losses of HK$39.3 million.
An investment company run by the four is alleged to have heavily traded the shares of the fashion retailer between June and September last year.
Investigations showed that a number of people created the appearance of active trading in Gay Giano by trading 29 million shares among themselves.
They allegedly traded between controlled accounts at 20 stockbrokers on 30 occasions.
Due to the active inner circle trading, it is alleged, Gay Giano's share price rose sharply following its debut on the main board on April 13 last year.
The retailer operates 20 clothing stores under the brands Gay Giano, Cour Carre and Due G. It also has five outlets in China.
The strong rise in the share price made other investors believe there was active trading in the stock, so they joined in and bought shares, it is alleged.
This pushed Gay Giano's share price to a peak of HK$4.65 on September 11 last year, 2.87 times its initial public offering price of HK$1.20.
The four accused allegedly took profits by selling shares in the middle of the month, resulting in Gay Giano's share price plunging 64.85 per cent on September 18 last year.
This allegedly triggered a sell-off by other investors, and the shares closed at about 80 HK cents at the end of September last year, down more than 80 per cent from their peak. The stock yesterday closed at 28 HK cents.
Police said 20 stockbrokers suffered losses of HK$39.3 million from margin trading.
The brokers incurred the losses as investors carried out margin trading using stock as collateral.
When the shares plunged, investors defaulted on repayment and the brokers were forced to take the shares.
The investment company run by the four accused also allegedly issued four post-dated cheques worth HK$23.5 million in the course of the trading, apparently to induce brokers to continue investment in the stock. The cheques were subsequently dishonoured.
The suspected market manipulation was reported to police last year by some of the brokers involved and the Securities and Futures Commission.
Officers of the Commercial Crime Bureau arrested three men and a woman between October last year and last month.
The woman was a former director of the investment company.
The four were charged with two counts of conspiracy to defraud.
They will appear in Eastern Magistracy today.