US SEC charges Future Fintech’s CEO with fraud
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The US Securities and Exchange Commission (SEC) recently charged Shanchun Huang, the CEO of Future Fintech, with fraud. According to the regulator, Haung failed to disclose his ownership and transactions of Future Fintech stock before becoming the company’s CEO.
Future Fintech’s CEO manipulated the firm’s stock price
According to the SEC, Huang allegedly used an offshore account to purchase and trade Future Fintech’s stocks back in 2019 and 2020. The regulator found that he traded quite high volumes in a two-month period, while at the same time, he placed numerous orders to buy stock in a short period with the goal of driving up prices.
The SEC says that, on February 6, 2020, Huang consisted of numerous buy orders in a nine-minute period. This created the illusion of a surge in demand, which caused the stock price to surge from $0.89 to $1.05. The regulator believes that his transactions were responsible for around 60% of the stock’s total trading volume at the time.
However, after becoming the company’s CEO, Huang failed to file a change of ownership form on his holdings of the firm’s stock until March 2021. At that time, he claimed that he no longer held any of the firm’s stock.
The SEC’s New York regional office’s associate regional director, Sheldon L. Pollock, commented on the matter, saying that timely disclosure of insider stock transactions is a crucial component of the federal securities laws. This ensures the fair operation of the securities market, and as a result, CEOs should always assume that the SEC’s staff will not be prevented from uncovering manipulative trading just because the CEOs used offshore accounts to conduct their trading.
According to the lawyer representing Huang, Jacob Frenkel, Huang has compelling defenses to the regulator’s allegations. Frenkel even said that Huang is confident in the outcome of the “misinformed civil complaint,” as he called it.
Huang may have manipulated the price to keep FTFT on Nasdaq
Interestingly, according to the SEC’s report on the matter, the trades came around the time when Future Fintech faced a risk of being delisted from Nasdaq. The reason behind this being the fact that the share price has dropped below the exchange’s minimum bid price requirement, which is $1 per share.
In other words, it is possible that Huang made his trades in order to artificially inflate the price and prevent this from happening. Now, however, in the aftermath of the lawsuit, the stock price of Future Fintech went down by 17% in after-hours trading this Thursday.
At the time of writing, the price of Future Fintech Group Inc (NASDAQ: FTFT) sits at $1.29 — significantly lower since its monthly peak of $2.03, which it achieved on December 28, 2023.
