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The Hong Kong police force said it arrested 15 people in connection with last month’s surge in shares of Next Digital Ltd., the media company owned by government critic Jimmy Lai.
The arrests were made on suspicion of using illegal funds and conspiracy to defraud, Chung Wing-man, chief superintendent of the narcotics bureau, told reporters at a briefing on Thursday. The people, who made a combined profit of around HK $ 38 million ($ 4.9 million), traded a high volume of Next Digital stock and police have reason to doubt their source of income, Chung said.
Police said one of the people had ties to organized crime and six were unemployed.
The news marked the latest twist in a drama that has captivated the financial center since Lai took place last month under Hong Kong’s controversial National Security Law. Next digital It soared more than 1,000% in a two-day span in August amid online calls to buy the stock in a show of support for Lai. The shares have since wiped out most of those gains after Hong Kong’s securities regulator urged “extreme caution” and after Lai himself told supporters to avoid buying.
After initially falling on Thursday, Next Digital’s shares soared as much as 97%, reflecting surges last month. A spokesperson for the Hong Kong Securities and Futures Commission declined to comment on the arrests, while police declined to comment on whether the markets regulator was involved in the investigation.
“It is unusual for the police to be involved in a market manipulation case; it may be overzealous of them to show stocks related to Apple Daily, ”said David Webb, an activist investor based in Hong Kong. “Normally the SFC takes him to the criminal Justice of the Peace or to the Civil Market Conduct Court, without great show. “
Webb said he was once a substantial shareholder in Next Digital stock, but declined to comment on his current holdings of shares. It owns 7% of Hong Kong Economic Times Holdings Ltd., he added.
The August rally followed a campaign by supporters of democracy to buy the company’s shares as a way to reject his arrest. Some Hong Kongers and companies that support the cause of democracy have also been buying ads on Lai’s Apple Daily to show their support.
“People with very little money just want to express their anger and express their support for our company,” Lai said in an interview with Bloomberg Television last month. “Everyone bought a little bit. That became a lot and drove the price up. She would tell people ‘don’t do it, don’t do it, because you’re going to lose money.’
The Hong Kong SFC has requested brokers to submit customer information and recent transaction records related to Next Digital shares, the Hong Kong Economic Journal reported at the time, citing unidentified brokers.
More than 516 million Next Digital shares changed hands on Thursday, compared with a record 4.1 billion on August 11.
“It is quite strange that the local police rather than the market regulator are investigating an incident in the stock market,” said Alvin Cheung, associate director of Prudential Brokerage Ltd. in Hong Kong. “People will wonder if something else is going on.”
– With the help of Amanda Wang and Jeanny Yu
(Updates with quote from activist investor in sixth paragraph)
