The former managing director of China’s Hanlong Mining, Steven Xiao, has been sentenced to eight years and three months jail for insider trading.
The sentence handed down in the New South Wales Supreme Court today by Justice Peter Hall represents the largest ever sentence in Australia for insider trading.
Xiao pleaded guilty to two rolled up charges of insider trading. He also admitted to a third rolled up charge relating to more than 100 illegal trades in Australian miners Sundance and Bannerman in 2011. The matter was prosecuted by the Commonwealth Director of Public Prosecutions.
The trades were linked to Hanlong’s ill-fated attempt to take over Sundance, which began in 2011.
Xiao was extradited to Australia in October 2014 after fleeing to Hong Kong amid an investigation by the Australian Securities and Investments Commission.
He will be forced to serve a minimum of five years and six months of his sentence before being released. The maximum sentence for each of the charges was 10 years.
Xiao has been in custody since his arrest in Hong Kong in January 2014 and his extradition. Taking into consideration the time already served, he will not qualify for release until after 11 July 2019, the market watchdog said.
ASIC Commissioner Cathie Armour welcomed the court’s decision.
"This sentence demonstrates the seriousness of insider trading. Maintaining confidence in the integrity of our financial markets is vital," she said in a statement.
Up until Xiao’s sentencing, the largest sentence ever handed down for insider trading in Australia was delivered to former National Australia Bank trader Lukas Kamay.
Kamay was sentenced to seven years and three months in March 2015 over a series of foreign exchange trades using data leaked by a university chum working at the Australian Bureau of Statistics. He is required to serve four years and six months of his sentence before being eligible for parole.
Fleeing to Hong Kong
Xiao was able to slip through ASIC’s net after the NSW Supreme Court varied court orders obtained by the regulator, which permitted him to travel to China and return to Australia in November 2011. However, the executive failed to return.
The Australian government issued a request to Hong Kong authorities to arrest him in November 2013.
In January 2014, Xiao was arrested in Hong Kong and, following extraction proceedings, Hong Kong issued an order to surrender him to Australia. He was escorted by officers from the Australian Federal Police from Hong Kong to Sydney.
The year-long case saw ASIC team up with the Commonwealth Attorney-General’s Department, the Commonwealth Director of Public Prosecutions, the AFP as well as the Hong Kong Department of Justice and the Hong Kong police.
Xiao is not the only former Hanlong Mining executive to be sentenced following ASIC’s investigation.
In February 2013, Bo Shi Zhu, Hanlong’s former vice-president, was convicted and sentenced to two years and three months in jail, to serve a minimum term of 15 months for insider trading.
Zhu pleaded guilty to procuring two friends between December 2006 and March 2007 to acquire shares in credit reporting company Veda Advantage, while he was possession of information relating to a proposed takeover of Veda by private equity outfit Pacific Equity Partners.
ASIC’s investigation into Hanlong Mining has led to $586,000 being restrained and $792,000 being forfeited under the Proceeds of Crime Act.
More to come
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