Fund manager Peter Siris and his Guerrilla Capital Management agreed to pay more than $1.1 million to settle allegations by the U.S. Securities and Exchange Commission of “wide-ranging misconduct” in connection with a Chinese reverse-merger firm.
The SEC today announced the settlement with Siris, a former writer for the New York Daily News and author of “Guerrilla Investing: Winning Strategies for Beating the Wall Street Professionals.” The agency also settled with Guerrilla Capital and a related firm, Hua Mei 21st Century LLC.
From 2007 to 2010, Siris and the firms sold unregistered securities and engaged in unregistered broker-dealer activity and illegal insider trading tied to China Yingxia International Inc., the SEC said in a complaint filed today in Manhattan federal court.
Siris, who manages two New York-based funds that invest in Chinese companies listed in the U.S., had about $160 million under management in 2010, according to the SEC’s complaint.
William Munno, a lawyer for Siris and his two firms, didn’t immediately return a message seeking comment on the SEC allegations and the settlement.
The SEC separately sued five other individuals and one firm for securities law violations related to China Yingxia, the agency said today in a statement.
Siris and investor-relations consultant Alan Sheinwald, who was sued in a separate action, acted as unregistered securities brokers in efforts to raise money for China Yingxia through private investment in public equity transactions, or PIPEs, the SEC alleged.
China Yingxia a was a nutritional health food business with operations in Harbin, China, which entered the U.S. capital market through a reverse merger deal in 2006, according to court filings. The company collapsed in 2009 amid allegations that its China-based chief executive officer had engaged in illegal fund-raising activities, the filings said.
The company’s former U.S.-based chief financial officer, Ren Hu, was accused by the agency of failing to implement appropriate accounting controls and making misstatements to investors.
Ernest Badway, a lawyer for Sheinwald and his firm Alliance Advisors, and Florian Miedel, who represents Hu, didn’t immediately return calls seeking comment.
Along with providing broker services and acting as a consultant to China Yingxia, Siris also invested about $1.5 million in the firm on behalf of his two funds. After receiving confidential information about trouble emerging at China Yingxia, including communication from its CEO, Siris started selling his shares to avoid losses, the SEC alleged.
Around the same time, Siris wrote in a letter to his investors that there was “reason to believe a restructuring can be achieved” at China Yingxia despite the illegal fundraising issues, according to the agency’s complaint. He also omitted material information concerning his role as a paid consultant in dealings with China Yingxia, the agency alleged.
Additionally, Siris, who was regularly asked to participate in Chinese company securities offerings, engaged in insider trading involving other companies, including China Green Agriculture Inc., SmartHeat Inc. and Puda Coal Inc., netting a total of $161,213 as a result of the illegal trading, the SEC alleged.
The case is Securities and Exchange Commission v. Siris, 12-cv-5810, U.S. District Court, Southern District of New York (Manhattan).