In the stock speculation case derived from the dispute over the management rights of Datong Company, Taiwanese businessman Zheng Wenyi and Shanghai Longfeng Enterprise Group Chairman Ren Guolong were accused of using multiple securities accounts to increase Datong's stock price from 5.51 yuan per share to 14.1 yuan per share, an increase of 155.9%, causing losses to investors. (schematic diagram)
[Reporter Yang Xinhui/Taipei Report] In a stock speculation case derived from the dispute over Datong Company's management rights, Taiwanese businessman Zheng Wenyi and Shanghai Longfeng Enterprise Group Chairman Ren Guolong were accused of using multiple securities accounts to increase Datong's stock price from 2016 to 2017. The stock price rose from 5.51 yuan to 14.1 yuan, an increase of 155.9%, causing losses to investors. The Securities Investors and Futures Traders Protection Center (Insurance Center) filed a civil claim, and four people in the first trial jointly and severally compensated more than 63.86 million yuan. After the case was appealed, the High Court today (10th) found that four people jointly manipulated the stock price. However, it recalculated the investors' losses and deducted the 20 million yuan in compensation, and the verdict was changed to the four people who should jointly and severally compensate more than 19.29 million yuan, which can be appealed.
The Insurance Center claimed that Zheng Wenyi, his secretary Zhang Xiangling, friends Zhang Juhua, Zou Xinghua, and Lin Zhenxing, together with two other people, used the securities account they actually controlled from September 1, 2016 to March 6, 2017, to artificially increase the stock price of Datong through relative entrustment, relative transactions, and continuous trading, causing investors to suffer losses due to their reliance on the manipulated market price. Therefore, they filed a civil lawsuit and requested the four people to jointly and severally compensate.
The Taipei District Court ruled in the first instance that the four people should jointly and severally compensate NT$63,863,634. The four people refused to accept the decision and filed an appeal. The Insurance Center reduced the amount of compensation to NT$43,863,634 in the second instance.
The Collegiate Court of the High Court pointed out that during the manipulation period, Zheng Nan and others purchased a total of 1,132,053 Datong stocks and sold 710,861 Datong stocks. Some of the trading volume even accounted for more than 40% of the total market trading volume on that day. Accounts in different groups traded with each other at agreed prices, and continuously bought at high prices and sold at low prices, creating the illusion of active trading.
As a result, Datong's stock price soared from 5.51 yuan per share to 14.1 yuan, an increase of 155.9%, and the average daily trading volume increased more than 10 times compared with before the operation. The High Court held that the relevant persons were not only familiar with each other, but also had large amounts of capital exchanges. The trading time, number of transactions and prices of each account were highly consistent, which showed that the market matching mechanism was not formed accidentally, which was sufficient to confirm that they had the intention of jointly manipulating stock prices.
Zheng Nan argued that the purpose of buying and selling Datong shares was to win seats as directors and supervisors and to obtain the company's operating rights, and not to speculate on stock prices. However, the High Court found that Zheng Nan's related accounts had sold nearly 100,000 shares in large quantities before the transfer of Datong stocks was stopped, which was inconsistent with the purpose of increasing shareholdings in order to gain management rights.
The High Court believed that Zheng Nan not only intended to fight for management rights, but also created the illusion of active trading by manipulating stock prices. He took advantage of the rising stock prices to sell a large number of shares to make profits, and then invested the funds in stock operations and repaying advance interest. This was tantamount to passing on the cost of acquiring Datong shares to the market, harming the rights and interests of unsuspecting investors. As for the other three people's arguments that they only assisted in contacting salespersons and advance financiers, or made transactions based on their personal judgment, the High Court also found it insufficient to be accepted.
The High Court pointed out that even if some investors engage in hedging, day-to-day hedging, or sell stocks after the manipulation period is over, it will not affect the determination of the causal relationship of the damage. The average closing price of 5.41 yuan per share in the 10 trading days before the manipulation is used as the basis. The real price was prepared and the total loss of investors was calculated at 39.291369 yuan. After deducting the 20 million yuan already paid by Zheng Wenyi and Zhang Xiangling, the verdict was changed that the four people should jointly and severally compensate 19.291369 yuan. The whole case can still be appealed.
