High flier charts crash landing

By Xu Fang  |   2008-11-4  |     NEWSPAPER EDITION

ZHU Yaoming, once a high-flying stock trader, went to court yesterday on charges that he invested nearly 5 billion yuan (US$731 million) - much of it obtained from fraudulent loans - in an elaborate scheme to manipulate share prices.

Prosecutors said Zhu had confessed to the crime and asked for leniency. The Shanghai No. 2 Intermediate People's Court did not render an immediate verdict.

Meanwhile China's bear market has already handed down its own judgment: Despite a massive spike at the height of his trading manipulations, Zhu's stock has fallen to a fraction of its former value.

And even if the court does grant his plea for leniency, Zhu faces 14 years in prison as a result of earlier convictions on financial fraud charges.

In the latest case, the Shanghai No. 2 Intermediate Prosecutors Office said that Zhu had set up 16 investment companies since 1999 in several provinces with falsified registered capital and distributed billions of yuan to these companies in preparation for investment in the stock market.

Zhu allegedly accumulated the capital by borrowing money from banks with false contracts signed among his own companies, financing from securities and collecting investment from others.

From January 1999 to June 2003, Zhu instructed 22 traders to set up 4,822 stock accounts in the name of his companies or individuals in 48 brokerages in 10 provinces and municipalities, the court heard. The brokers were ordered to buy shares of Hubei Biocause Pharmaceutical Co Ltd at low prices and then boost prices by making rapid trades among the stock accounts controlled by Zhu. Altogether 4.89 billion yuan was invested in the stock trades, prosecutors said.

Zhu's manipulations caused the company's share price to increase from around 9 yuan to a high of 25 yuan. The stock market crash, however, caused Biocause share prices to plummet to about 1 yuan.