Suspected of stock price manipulation and engaging in illegal financial activities, the regulator even revealed the "mask" of Ding Yifeng

In the past two days, the regulators have torn off the "mask" of Ding Yifeng one after another.

On March 27, the Hong Kong Securities and Futures Commission announced that it had imposed a penalty on Ding Yifeng Holdings (00612. HK) and 20 other persons commenced an inquiry in the Market Misconduct Tribunal. On March 28, the Office of the Special Working Group for the Prevention and Disposal of Illegal Fundraising in Shenzhen (hereinafter referred to as the "Shenzhen Non-Governmental Affairs Office") issued a document in the Shenzhen Local Financial Administration stating that Ding Yifeng International Asset Management Group Co., Ltd. (hereinafter referred to as "Ding Yifeng") advertised and issued a DDO digital option in China to solicit the public to subscribe for investment. This act is essentially the issuance and trading of virtual currency, which is an illegal financial activity.

Not long ago, at the beginning of 2024, Ding Yifeng attracted attention because the product could not be redeemed in a large area. Behind the suspension of product redemption and the legal investigation of the former chairman, Ding Yifeng Holdings' recently announced financial report is not optimistic, with operating income and net profit both in the doldrums, and the market value of investing in the securities of listed companies will shrink sharply in 2023.

Ding Yifeng pinned his hopes for a breakthrough on digital options. Recently, a number of investors have reported that Ding Yifeng Digital Asset Exchange BHE has been officially launched and issued the so-called digital option Ding Dao Option (DDO). However, judging from the regulatory tips, the transaction of this product has been characterized as "illegal financial activities".

A large number of counter-trading transactions are suspected of manipulating stock prices

The announcement of the Hong Kong Securities and Futures Commission exposed the method of manipulating and speculating the stock price of Ding Yifeng many years ago.

According to the Hong Kong Securities and Futures Commission, between March 1, 2018 and September 14, 2018, Sui Guangyi and others conducted manipulative transactions and a large number of counter-trading transactions in relation to Ding Yifeng shares.

According to industry insiders, a matching transaction refers to a transaction that is carried out at the same or nearly the same time, and the number and price of shares are similar or the same. In some stocks with less liquidity, this method is a common means of "sitting in the bank", which can speculate on the stock price in the short term.

In addition, the SFC also mentioned that Sui Guangyi and others also created a false or misleading appearance of active trading in the shares and the relevant share prices. Their actions led to a significant increase in overall trading volume, which gave the false impression that Ding Yifeng shares had a large market liquidity and misled other market participants.

Under the above means, Ding Yifeng's share price soared all the way in 2017~2018. In July 2017, the share price of Ding Yifeng Holdings was still hovering around HK$0.8 per share, and by July 2018, it had risen to HK$8 per share, an increase of nearly ten times. In July ~ November 2018, the stock accelerated its rise, and in just 4 months, it rose all the way to 27.1 Hong Kong dollars per share on November 1.

However, compared with the soaring stock price, the performance of Ding Yifeng Holdings continues to be sluggish. According to the financial report data, in 2017~2019, Ding Yifeng's operating income was HK $12,560, HK $36.61 million, and HK $1.317 million respectively, with a year-on-year change of -97.8%, 291,300%, and -96.4%. Profit attributable to shareholders was -HK$155.1 million, HK$128.6 million and -HK$250.8 million respectively.

This anomaly has also attracted the attention of regulators many times. On 8 March 2019, Ding Yifeng Holdings suspended trading in accordance with the instructions of the Securities and Futures Commission of Hong Kong.

In June 2019, the SFC issued restraining notices to a total of 17 brokerages, prohibiting them from disposing of or dealing with certain assets held in their clients' accounts.

These accounts are related to Ding Yifeng's alleged market manipulation activities between 2018 and early 2019. At this time, the relevant restriction notices are still in effect.

On 26 February 2024, the SFC commenced legal proceedings in the Court of First Instance against Sui Guangyi, the former chairman and non-executive director of Ding Yifeng, and 20 other persons.

It is worth noting that a similar plot has also been found in another listed company bought by Sui Guangyi, Huayin International Holdings (00989. HK) "Repeated". Since August 2020, Ding Yifeng and Sui Guangyi have successively purchased shares of Huayin International Holdings. In August 2020, Hong Kong Toprich Investment Limited (Hong Kong Haofu), a wholly-owned subsidiary of Ding Yifeng, purchased 1.05 billion ordinary shares of Huayin International Holdings. At the end of July 2022, Tianfon International Holdings Co., Ltd. purchased 1 billion shares of Huayin International Holdings again. Tianfon International is 90% owned by Sui Guangyi.

Before and after these two purchases, the share price of Huayin International Holdings also fluctuated greatly. In August 2020, when Ding Yifeng bought for the first time, the share price of Huayin International Holdings suddenly rose. It rose from HK$0.06 per share on August 3, 2020 to HK$0.52 per share on August 17, 2020. On August 1, 2022, the stock price was only HK$0.51 shares, and at the end of August, it had exceeded HK$0.6 shares.

The performance loss exceeded HK$300 million

Judging from the latest financial report released by Ding Yifeng Holdings on March 25, Ding Yifeng Holdings' revenue and net profit in 2023 are both sluggish. According to the financial report, the company's operating income last year was only HK $1.134 million, which mainly came from interest income from banks and financial institutions. During the same period, the company's net profit loss reached HK$311 million.

Performance losses are the norm for Ding Yifeng. In the 7 years from 2017 ~ 2023, the company has recorded a loss in net profit for 4 years.

According to an industry insider's analysis, Ding Yifeng Holdings belongs to the "Chapter 21 Company", and the company itself does not operate a specific main business, but only aims at investment. Judging from the financial report data, Ding Yifeng's investment income in 2023 is not optimistic.

According to the financial report, as of the end of December 2023, the total shares of listed companies held by the company were about HK $380 million, a year-on-year decrease of 37%.

According to the disclosure, Ding Yifeng Holdings mainly invested in five Hong Kong-listed companies, namely the Hong Kong Stock Exchange, Tencent, Huayin International, Venture Group and Jiading International, with a total market value of HK $290 million, and held A-share listed companies Rainbow Shares and Huizhou Intelligence, with a total market value of HK $90 million.

However, several of the weighted stocks invested by Ding Yifeng fell significantly last year. According to wind data, Huayin International Holdings will fall by more than 59% in 2023, and Tencent will fall by more than 6% during the year.

Digital options are alleged to be illegal fundraising

In addition to years of losses and stock price manipulation, Ding Yifeng's latest digital options have also been "named" by regulators.

At the beginning of 2024, Ding Yifeng attracted attention because of the inability to redeem a large area of products. According to a number of contracts previously obtained by Yicai, although the so-called products of Ding Yifeng have different income methods and terms, the annualized return after conversion is as high as 36%~60%, and the corresponding assets subscribed are the original options of Ding Yifeng International Holdings Co., Ltd.

According to the information provided by investors, from August 2023, Ding Yifeng has shown signs of stopping the payment of principal and dividends. By January 2024, there will be a large-scale suspension of Ding Yifeng's products.

Subsequently, Ding Yifeng told investors that it was planning to go public with digital options, and called on investors to convert the original equity contract into a digital option contract. The reporter learned that some investors have completed the contract conversion.

According to an investor, on February 5, Ding Yifeng Digital Asset Exchange BHE was officially launched and issued a digital option, Ding Dao Option (DDO). The first tranche of converted original equity contracts was converted into USD amounts (7:1) at a premium amount and listed at an original price of $1 per share.

According to the information provided by investors, in the distribution mechanism of DDO, the part from the anchoring and translation of offline assets will reach 54 billion yuan.

Many industry insiders believe that this kind of digital options and virtual currency issuance models are not compliant in China. On September 24, 2021, the People's Bank of China (PBOC) issued a notice to strictly prohibit illegal financial activities such as illegal sale of token bills, unauthorized public issuance of securities, illegal operation of futures business, illegal fundraising and other illegal financial activities such as the exchange of legal tender and virtual currency, the exchange business between virtual currencies, the buying and selling of virtual currencies as a central counterparty, the provision of information intermediary and pricing services for virtual currency transactions, the issuance of tokens and financing, and the trading of virtual currency derivatives. Where the carrying out of relevant illegal financial activities constitutes a crime, criminal responsibility shall be pursued in accordance with law.

"Blockchain-like coin issuance is prohibited in mainland China. Wang Pengbo, a senior analyst in the financial industry at Broadcom Analysis, told the first financial reporter that there are no formal channels for such products to circulate and trade in the mainland, and transferring money to overseas accounts for currency speculation also faces multiple risks.

The Shenzhen Non-Governmental Affairs Office also pointed out that Ding Yifeng International Asset Management Group Co., Ltd. (hereinafter referred to as "Ding Yifeng") advertised the issuance of a DDO digital option in China to solicit the public to subscribe for investment. This act is essentially the issuance and trading of virtual currency, which is an illegal financial activity. It is recommended that the people involved in the relevant trading activities withdraw as soon as possible, collect and preserve relevant evidence, and report to the local regulatory authorities and public security organs in a timely manner. Because virtual currency lacks a clear value base, it is easy to maliciously speculate and price manipulation, has extremely high transaction risks, and is easy to become a tool for illegal fundraising, fraud, money laundering, drug trafficking, smuggling and other illegal and criminal activities.