Selling stock tips proves bad investment for Shanghai 5

By Cao Li (China Daily)
Updated: 2008-07-01 07:56

SHANGHAI - A gang of five has become the first in Shanghai to face prosecution for giving illegal stock investment consultations that earned them 14 million yuan ($2 million).

Taiwan investor Hong Zhicheng, and his mainlander employees Zhang Juanliang, Deng Sen, Xiang Mingrui and Shu Miaogen sold specialist software for analyzing stock fluctuations and invested on behalf of their clients without a license, Shanghai Pudong New Area People's Court heard on Monday.

"We promised that whoever bought our software would receive professional advice on what stock to buy, and that whoever paid us to buy and sell stocks would see an annual return of at least 30 percent," Xiang Mingrui, who worked as a stock analyst for the Gulaixin Company owned by first defendant Hong, said.

The company bought time slots on a local financial services radio program and sent analysts including Xiang to analyze markets and recommend stocks.

The software was sold for between 5,000 yuan and 50,000 yuan, depending on the number of programs and advisory services attached.

If the group enabled a client to make more than a 10 per cent return on the stock market, it received 30 percent of the total profits. By June of last year, the group had made more than 14 million yuan from the illicit practices.

One retiree in the court gallery said the program appealed to her and that she had called to inquire. She then hired the company to invest for her from her account.

"I had 200,000 yuan in my account, to which I later added 100,000 yuan," she said.

The woman, who declined to give her name, said that she had received some returns from the company by the end of 2006. "But they have not paid me back the 30,000 yuan deposit," she said.

Wu Xindi, 57, paid the company 50,000 yuan for the software on July 19, 2006. She found out later the company was not qualified to offer the services and sued the group.

On May 15, last year, the Pudong court supported her appeal and ordered the company to reimburse her 50,000 yuan.

The gang was arrested on June 22, last year.

The group members face imprisonment of at least five years and a fine of up to five times their illegal earnings according to law, the prosecutors said.