MANHATTAN (CN) - The SEC on Monday sued Everbright Development Overseas Ltd. and its naturalized Chinese boss, who it claims is "on the run" in China for a $20 million securities fraud: victimizing a Nevada mining company by furtively buying up its stock, intentionally disseminating false information about it, then selling into an artificially inflated market.
The SEC sued Luis Chang and Everbright in Federal Court.
Chang, a naturalized U.S. citizen, is "on the run" in China, according to the 18-page complaint.
"The Commission brings this action to protect American investors and the integrity of the securities markets from a predatory entity and its agents," the lawsuit states. "These schemers victimized an American mining company, Allied Nevada Gold Corporation ('Allied Nevada' or 'ANV'), by furtively buying up its stock, intentionally disseminating false information about it, and then selling its shares into a falsely inflated market.
"On the evening of January 13, 2013, Luis Chang, claiming to be the agent of a Chinese mining company named China Gold Stone Mining Development Limited ('China Gold'), caused Christopher J. Baclawski, a self-described investment banker, to send a letter on China Gold's behalf to ANV management proposing to make a cash tender offer. At 6 a.m. the next morning, Chang used Baclawski to issue a press release announcing that China Gold had 'commenced a cash tender offer' for ANV. ANV's stock price and trading volume immediately surged in reaction to the press release.
"The letter and the press release contained material misrepresentations and omissions. No public information exists to validate the claims Chang made about China Gold, namely that China Gold was a Hong Kong mining company that owned three gold mines in China worth $15 billion and possessed the capital to make a cash tender offer for ANV in what would have been a $750 million deal. Further, neither the letter nor the press release revealed that Chang, while driving the purported tender offer, had bought over 5 percent of ANV stock though an entity he controls, defendant Everbright Development Overseas Limited. Everbright sold its entire position in ANV into a market that was inflated by Chang's phony tender offer, for a profit of over $7 million. Chang is now on the run in China, where Everbright has wired over $20 million since profiting from its manipulation of ANV securities."
Baclawski is not a party to this lawsuit.
The SEC seeks an accounting, disgorgement, penalties and an injunction.