The FBI said it searched the Manhattan offices of reverse merger advisory firm New York Global Group, which specializes in helping companies from China go public in the U.S.
New York Global describes itself as a private-equity and corporate advisory firm also with offices in Beijing. New York Global Group clients that became publicly traded in the U.S. through reverse mergers include CleanTech Innovations Inc. (CTEK) and Harbin Electric Inc.
“These searches were conducted in relation to an ongoing FBI investigation,” Jim Margolin, a spokesman and agent with the Federal Bureau of Investigation’s New York office, said yesterday in a phone interview. Margolin declined to discuss the reason for the Jan. 25 search of New York Global Group’s office at 40 Wall St. or who may be under federal criminal scrutiny.
Benjamin Wey, founder and president of New York Global Group, declined to immediately comment on the search. The news of the raid was first reported by The Financial Investigator.
In a reverse merger, a closely held firm buys a publicly traded shell company and retains its listing. The reverse-merger process is faster and less expensive than initial public offerings.
Chinese stock trading in the U.S. has faced investor scrutiny after companies such as China MediaExpress Holdings Inc. disclosed financial irregularities or auditor resignations. Concern has focused on the more than 400 Chinese businesses that have used reverse mergers. The U.S. Securities and Exchange Commission in June cautioned investors about buying stakes in reverse merger companies, saying they may be prone to “fraud and other abuses.”
The SEC approved rules in November to toughen the listing standards for companies that go public through reverse mergers.
Wey has built a career bringing companies from China onto U.S. exchanges. He said in a 2010 interview that his clients didn’t want to wait to list at home and that a full-blown initial public offering in the U.S. is expensive and difficult.
In 2007, the American Stock Exchange delisted a fertilizer company that Wey brought over, Bodisen Biotech Inc., for incomplete and inaccurate disclosures related to share ownership by officers as well as payments to Wey’s company.
The Oklahoma Department of Securities censured Wey in 2005 for not advising customers of the risks of stocks he sold and not disclosing consulting relationships with some of the companies. Wey agreed to a ban on working in the securities business in the state without admitting to the allegations.