Future FinTech Group's shares fell as much as 20% in Friday premarket trading after the US Securities and Exchange Commission (SEC) charged CEO Shanchun Huang with manipulative trading and failure to disclose beneficial ownership. The charges stem from Huang's allegedly suspicious activities in the stock market just before assuming the role of CEO in 2020.
In a statement, the SEC claimed that Huang engaged in manipulative trading using an offshore account in Hong Kong. The complaint suggests that Huang, who was approached in late 2019 or early 2020 to become Future FinTech's CEO, began trading in the company's stock in January 2020. At the time, Future FinTech faced potential delisting from NASDAQ due to its stock price falling below the minimum bid requirement of $1 per share.
Huang allegedly purchased over 530,000 shares within two months, executing trades that significantly impacted the daily trading volume. The SEC contends that his actions were designed to inflate Future FinTech's stock price, citing instances where Huang's trading constituted 60% of the daily volume. Notably, on February 6, 2020, his rapid buy orders within nine minutes drove the stock price from $0.89 to $1.05.
Following his appointment as CEO in March 2020, Huang was required to disclose his holdings of Future FinTech stock. The SEC alleges that Huang failed to file the necessary forms for the year after assuming the CEO position. The complaint further claims that, even after divesting all Future FinTech stock in March 2021, Huang submitted a misleading form, falsely representing that he owned no stock.
"Timely disclosure of insider stock transactions is a fundamental component of the federal securities laws that ensures the fair operation of our securities markets," commented SEC associate regional director Sheldon Pollock.
“CEOs should assume that the use of an offshore account will not prevent the staff of the SEC from identifying manipulative trading.”
The SEC's complaint charges Huang with violating antifraud and beneficial ownership disclosure provisions. It seeks permanent injunctive relief, a civil penalty, and an officer-and-director bar.
Ahead of the opening bell, Future FinTech's shares were down 16% at $1.08.