Two men were charged with conspiracy to commit securities fraud and wire fraud, securities fraud and wire fraud for their connection to a securities fraud scheme, according to a recently unsealed indictment from the Eastern District of Virginia.
According to the indictment, Lai Kui Sen, Ostin Technology Group Co. (OST) CEO, and Yan Zhao, a financial advisor who goes by several aliases, targeted American retail investors. OST is a Cayman Islands company with its principal operations in China. It is publicly traded on NASDAQ and was operated at one point using a variable interest entity investment structure. The company claimed to manufacture display modules for consumer electronics, LCD displays and automobiles.
The defendants and their co-conspirators engaged in a scheme to provide 15 co-conspirators with tens of millions of OST shares through two non-bona fide securities transactions. In one of these transactions, the co-conspirators paid $0 to OST for more than 70 million shares. They netted more than $100 million.
On April 15, investors received their first tranche of heavily discounted OST shares. The co-conspirators began a fraudulent campaign to artificially inflate the price and trading volume of the OST stock. On June 26, OST lost more than $950 million in market capitalization.