SinoTech Signs $20 Million Settlement in Stock-Fraud SuitBob Van Voris
SinoTech Energy Ltd., a Beijing-based oilfield equipment supplier, agreed to pay $20 million to settle a lawsuit claiming the company misled investors in its 2010 initial public offering.
A group of investors, led by Zech Capital LLC, agreed to the settlement with SinoTech and with UBS AG, Citigroup Inc. and Lazard Capital Markets LLC, the underwriters of the IPO. U.S. District Judge Alison Nathan in Manhattan must approve the settlement, which was filed with the court yesterday.
Ernst & Young Hua Ming LLP, which was also named as a defendant, isn’t part of the agreement.
The U.S. Securities and Exchange Commission last year sued SinoTech; Qingzeng Liu, the company’s chairman and controlling shareholder; Chief Executive Officer Guoqiang Xin; and Boxun Zhang, a former chief financial officer, claiming they committed securities fraud. SinoTech lied about how much of the IPO proceeds it spent on drilling equipment, according to the SEC. The regulator also claimed Liu stole $40 million from the company’s bank account.
SinoTech, Liu and Xin have settled the SEC claims, according to court records. Zhang remains a defendant.
SinoTech plunged 42 percent to $2.35 on the Nasdaq Stock Market on Aug. 16, 2011, after Alfredlittle.com published a short-seller’s note saying the company’s largest customers were probably “nothing more than empty shells” and that it was worth less than 63 cents a share. SinoTech called the note “inaccurate and defamatory.”
Nasdaq delisted SinoTech in January 2012.
The case is Athale v. SinoTech Energy Ltd., 11-CV-5831, U.S. District Court, Southern District of New York (Manhattan). The SEC case is SEC v. Sinotech Energy Ltd., 12-cv-00960, U.S. District Court, Western District of Louisiana (Lake Charles).