[ by Melanie Gretchen and Howard Haykin ]

The founder and manager of Tiger Asia Management, Tiger Asia Partners - 2 NY-based funds - was charged with violating several securities laws, beginning with shorting shares of Chinese banks based on material nonpublic information. 

Profile of Defendants.   SEC filed complaints against Tiger Asia Management, LLC, Tiger Asia Partners, LLC, Sung Kook (a/k/a Bill) Hwang, Raymond Y.H. Park.

• Hwang, age 48, of Tenafly, NJ, he sole principal and portfolio manager of Tiger Asia Fund and Tiger Asia Overseas Fund. He has held Series 7, 24 and 63 licenses.

• Tiger Management served as the unregistered investment adviser and investment manager to Tiger Asia Overseas Fund, Ltd., and was responsible for administrative matters relating to the Tiger Asia Fund.  Hwang owns and controls Tiger Management.

• Tiger Partners served as the unregistered investment adviser and general partner of Tiger Asia Fund L.P.  Hwang owns and controls Tiger Partners.

• Park, 40, of Riverdale, NY, was employed by Tiger Management and was head trader for the Funds.  Served as the point of contact for investment banks soliciting the Funds to participate in private placements. Park reported to Hwang and executed Hwang's trading instructions; Park had no trading authority himself. Park has held Series 7, 55 and 63 licenses.

SEC Findings and Allegations. Violation #1.   Between December 2008 and January 2009, Park, on behalf of the Tiger Asia funds, entered into "wall-crossing" agreements for 3 private placements of Chinese bank stocks.  He passed information from these conversations to Hwang, who then instructed Park to short the shares of these 3 stocks using material confidential information just received. 

Violation #2.  Hwang also ordered Park to purchase large amounts of stock in each Chinese Bank Placement at the discounted placement price, some of which was used to cover the Funds' newly-acquired short positions. This illegal trading resulted in more than $16 million in illicit profits for the funds. 

Violation #3.   Also, starting in November 2008 and continuing through February 2009, Hwang, Tiger Management, and Tiger Partners, aided and abetted by Park, attempted to manipulate the price of the bank shares that they sold short for the funds.  They placed losing trades in an attempt to lower the price of the shares.  These fraudulent transactions had the following impact:

• it artificially increased the value of the short positions;
• it enabled Hwang and Tiger Asia Management to illicitly collect higher management fees because assets under management were inflated;
• it reduced the price they had to pay for shares offered in the private placement, which was computed at a discount to the previous day's close. 

Alleged Violations and SEC Sanctions.  The SEC complaint charges Hwang, his firms, and Park with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Section 17(a) of the Securities Act of 1933. Hwang and his firms also are charged with violating Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8, and Park is charged with aiding and abetting those violations.

All defendants agreed to settle the SEC charges, subject to the consent of the court.  Terms of the settlements were, as follows:

• Hwang, Tiger Asia Management, Tiger Asia Partners to collectively pay $19mn in disgorgement and prejudgment interest.
• Each fund agreed to pay over $8mn in penalties;
• Park agreed to pay $75K in disgorgement, prejudgment interest and penalties;
• Hwang agreed to a 5-year ban from the securities industry;
• Park agreed to a 3-year ban.

"Hwang today learned the painful lesson that illegal offshore trading is not off-limits from U.S. law enforcement, and tomorrow’s would-be securities law violators would be well-advised to heed this warning." -- Robert Khuzami, Director of the SEC’s Division of Enforcement.
 

For further details, go to [SEC Press Release 2012-264, 12/12/12] and  [SEC Complaint].