The US Securities Exchange Commission on Monday filed a lawsuit against a Toronto-based consultant and four others for fraud and stock price manipulation involving Chinese companies that listed in the US, The Wall Street Journal reported. The five, who act as “gatekeepers” for Chinese companies entering US financial markets, were accused of arranging a “reverse merger” for China Auto Logistics (CALI.NASDAQ) and Guanwei Recycling (GPRC.NASDAQ), in which they paid the costs of helping the companies enter the US in exchange for 30% to 40% of the resulting stock. They then allegedly ran a pump-and-dump scheme, making millions of dollars in profit.
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