September 8, 2015 / 2:44 PM / 3 years ago

Chinese citizens in $2.8 million insider trading deal with SEC

NEW YORK, Sept 8 (Reuters) - Two Beijing residents agreed to pay nearly $2.77 million to resolve a U.S. regulator’s charges that their “remarkably timed” purchase of options in Chinese e-commerce company 58.com Inc stemmed from insider trading, according to court papers.

The proposed settlements between the U.S. Securities and Exchange Commission and the Chinese nationals, Xiaoyu Xia and Yanting Hu, were disclosed in the papers filed in federal court in Manhattan last week.

Without admitting or denying wrongdoing, Xia agreed to pay nearly $2.35 million, while Hu agreed to pay $416,038, the SEC said in a court filing on Thursday. The settlement must be approved by U.S. District Judge William Pauley.

Lawyers for Xia, a man who is a director at China-based investment firm, and Hu, a woman who works for a Chinese airline, did not respond to requests for comment on Tuesday.

The SEC alleged that Xia and Hu made more than $2 million by investing in the call options - essentially bets that the stock would rise - before news broke in April that 58.com agreed to buy a 43.2 percent stake in Ganji.com, and that Tencent Holdings Ltd would invest $400 million in 58.com.

The announcement pushed 58.com’s stock price up 34 percent to $67.87, the highest it had reached since its October 2013 debut on the New York Stock Exchange.

The SEC called the trading by Xia and Hu “remarkably timed,” while saying both had connections to the Chinese financial industry.

The SEC said Xia, a director at investment firm Chinastone Capital Management Limited, was tied to a network of individuals regularly called on to work on deals such as 58.com Inc’s and therefore may have known people with inside information.

Hu, meanwhile, appeared to be connected to an individual at a large Hong Kong investment bank that assisted Tencent with financing matters, the SEC said.

The SEC filed its civil lawsuit in April. A federal judge soon after issued an asset freeze against monies held in Xia’s and Hu’s U.S. brokerage accounts.

The case is Securities and Exchange Commission v. Xia, U.S. District Court, Southern District of New York, No. 15-03320. (Reporting by Nate Raymond in New York; Editing by Jonathan Oatis)

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