The chief financial officer of formerly ASX-listed company Traditional Therapy Clinics Limited has been sentenced to 1 year and 10 months imprisonment for stock market manipulation.
The NSW District Court also ordered Zhonghan Wu to serve 2 years and 6 months of a community corrections order for fraud convictions.
The sentencing was the result of an Australian Securities and Investment Commission (ASIC) investigation into Traditional Therapy Clinics shares immediately after it listed on the ASX in 2015.
The initial public offering (IPO) had raised $15 million for the business, at 50 cents per share.
Trying to keep the shares above IPO price
Wu, who is also known as John, executed transactions through multiple broking accounts as soon as Traditional Therapy Clinics was listed on the bourse.
According to ASIC, he was trying to artificially keep the stock above the IPO price.
“Mr Wu carried out and attempted to carry out multiple share transactions in TTC shares using four different trading accounts. The trading had the effect of creating an artificial price for TTC shares on the Australian Securities Exchange (ASX),” the watchdog stated.
“When trades in one trading account were rejected for suspicious trading, Mr Wu would use another trading account to continue trading in TTC shares.”
Judge Mark Buscombe found Wu’s trading “undermined the integrity of the market”. The judge added that the executive knew his “brazen campaign of price manipulation” was “wrong and illegal”.
Traditional Therapy Clinics was delisted in 2018 after it went into administration.
Loan fraud on Commonwealth Bank
Wu’s sentencing to community corrections order was for pleading guilty to fraud on a separate matter.
ASIC alleged that in 2012 and 2015 Wu was granted loans from Commonwealth Bank of Australia (ASX: CBA) totalling $550,000.
The CFO was later found to have submitted “false and misleading” documents to the bank in support of his loan applications.
Wu, who is out on bail, was ordered to undergo an Intensive Correction Order assessment. The result will be considered in the NSW District Court on 2 July to determine the exact nature of his imprisonment.