Vietnamese police have charged the former chairman of a local pharmaceutical firm with manipulating stock prices of his own company as well as another drug maker last year.
If found guilty, Le Van Dung, former chairman and general director of Vien Dong Pharma JSC, will be the first person in Vietnam to be punished for stock manipulation.
This also means that the 39-year-old tycoon could face up to seven years in prison. He was arrested last November.
The case is now being studied by the Supreme People's Procuracy, the highest prosecutor's office of Vietnam.
According to investigators of the Ministry of Public Security, Dung listed his company on the Ho Chi Minh Stock Exchange in December, 2009.
Soon after the Vien Dong (DVD) stock made its debut, Dung opened 12 different trading accounts, including six at Sacombank Securities under his name and the names of his relatives and friends.
Dung then conducted 1,725 transactions of buying and selling DVD shares among these accounts from January, 2010 to September, 2010, Lao Dong newspaper reported Tuesday, citing the police investigators. It meant that Dung was the only one to buy back the shares he sold on the same day.
The aim of this activity was to create false demand and supply so that he could boost liquidity of the DVD stock and make it more appealing to investors.
Under the current rules, investors are allowed to only have one trading account. They are also banned from buying and selling the same shares the same day.
Investors will have to wait until August 1 this year to be allowed to open multiple accounts at brokerages as well as to buy and sell a stock within the same trading session.
Apart from "artificially" creating demand and supply for DVD shares to attract investors to pour money into the stock, Dung also manipulated the share price of another drug maker, the Ha Tay Pharmaceutical JSC, aiming to acquire a major holding in Ha Tay and merge it with Vien Dong, investigators said.
They said Dung opened five more accounts to have a total of 11 accounts at Sacombank Securities alone to buy 84.4 percent of Ha Tay (DHT) shares traded on the market and sell 64.2 percent as of September, 2010, according to a report in the Lao Dong newspaper.
Investigations also showed that Le Minh Truyen, his broker at Sacombank Securities, knew about the scheme and actually helped Dung trade a large amount of DHT shares at his request, the paper said.
Truyen, in charge of transactions at the brokerage, also helped the internal scheme by choosing the best times and selling DHT shares when the trading activities were slow. The goal was to make sure that Dung was the only one to buy back the shares that he'd sold earlier in the same session.
The State Securities Commission said Dung's stock manipulation scheme caused "serious consequences." Thirteen investors reportedly suffered a total loss of nearly VND2 billion (US$97,250) due to the scam.
Apart from Dung, the Ministry of Public Securities also asked the Supreme People's Procuracy, Vietnam's highest office of prosecutors, to press charges against Nguyen Van Viet, 35, a member of Vien Dong's management board, Le Van Manh, 34, chairman of the Vien Dong International JSC, and Le Minh Truyen, 27 for their involvement in the manipulation scheme.
Viet and Manh are now in custody. Truyen has not been arrested but been suspended from his brokering job.