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| Benjamin Wey |
The other party in the case is in some ways the more interesting of the two. Let's start by calling him by his name, Benjamin (Ben) Wey.
It's a little surprising that tabloid reporters didn't bother looking into Wey's business career. He has been followed for years by the financial press, which generally has concluded that his reputation is not of the best.
Wey, a Chinese immigrant and now a U.S. citizen, settled first in Oklahoma, where he earned a bachelor's degree and then an MBA (that apparently wasn't classy enough; he got a second MBA later at Columbia, he says).
He started his career in Oklahoma. By 2002, according to a generally approving article in The Daily Oklahoman, he was working to pair Chinese companies with American investors. Almost incidentally, the article noted that the Oklahoma Department of Securities judged Wey's 1997 and 1999 audits as "lax in such areas as record-keeping and providing written disclosure statements to some clients."
Later, in the Financial Times, came this:
"Oklahoma state’s Department of Securities found that Mr Wey had advised a
retired 68-year-old woman in 1999 to invest her entire life savings of $80,000
in . . . a risky penny stock, without mentioning that he was a paid consultant to
the company. . . .
"Mr Wey promised the woman her investment would double within three months.
When it did not, he sold the shares on her instructions in March 2000 for a profit of
about $8,000. But he then re-invested the entire $88,682 in the same company
. . . without her knowledge. . . .
"Within three months of the second investment her life savings had fallen to
$17,710, the investigation concluded. It also found several other instances where
Mr Wey failed to follow customers’ instructions and personally sold shares he was
advising customers to buy or hold.
"Without admitting or denying any of the findings, Mr Wey agreed in 2005 to be
censured by the Oklahoma Department of Securities and to never again do any
brokerage or investment advisory business in the state. . . . "
On to Wall Street and Reverse Mergers
The Sooner State's loss was the Big Apple's gain.
Wey set up a new business, New York Global Group, on Wall Street and began arranging "reverse mergers" in which Chinese companies were grafted onto American shell corporations to gain listings on American markets.
You may remember the period, starting around 2002, when the Chinese economy was growing rapidly and investors were eager to get in on the action. By late 2010, U.S. regulators were fielding complaints about Chinese investments that had soured. By 2011, the American press was reporting on a pattern of -- shall we say -- underperforming investments in reverse mergers, including some that Wey and New York Global had promoted.
Here is how a Forbes columnist explained it in 2013:
"Regulators and short-sellers pointed specifically at Chinese reverse-merger
companies, which bought U.S. publicly traded shell companies and retained
their U.S. listings, hence bypassing the requirements of initial public offerings.
"Although reverse-merging is a well established practice and the 159 reverse-
merger transactions by Chinese companies from 2007 to 2010 was only 26%
of the total, a significant proportion of those investigated for fraud were Chinese
reverse-merger companies."
Ben Way claimed at one point to have advised on as many as 200 reverse mergers. When a number of them failed -- often for dodgy financials -- Wey complained that investigators were anti-Chinese racists and that short sellers were savaging the stocks' prices.
One of his companies, for example, was listed on the American stock exchange and then delisted in 2007, based in part on its irregular relationship with Wey. (The company severed the relationship that year.) Later the company was relisted on another, smaller exchange; the smaller exchange delisted it in 2014 for failure to provide audited financial statements. Its stock price has ranged from an early high of $20 a share to a close of eight-tenths of a cent per in over-the-counter trading Wednesday.
We cannot blame Wey for the company's post-2007 results, perhaps, but it seems safe to guess that it was overhyped when he helped to get it listed on Amex in 2005.
Wey in the Press
A Barron's article in 2011 described the company discussed above as "one early sinkhole" and Wey as “[o]ne of the most controversial promoters of Chinese reverse takeovers.”
The article also said "much of the universe of Chinese reverse mergers has become a swamp of revenue disappointment, earnings restatements and some outright fraud."
Wey, who from time to time identifies himself as an "investigative reporter," retaliated against the Barron's writers on his blog, The Blot. Here's the opener:
In another case, Roddy Boyd discussed Wey and New York Global in 2011 on his blog, "The Financial Investigator." (Boyd has since moved to the Southern Investigative Reporting Foundation, SIRF, another worthy effort.)
Boyd's article said Wey and the auditors of companies he sponsored did not exactly operate at arm's length and that more than a few of the audits and financial forecasts supporting Wey's reverse mergers simply made no sense.
In one case, "Household appliance maker Deer Consumer Products grew revenues 400 percent between 2008 and 2010 and reported operating margins of 21 percent, hundreds -- and occasionally thousands -- of basis points higher than even its Chinese competitors."
Boyd wrote about Wey several more times over the years. Here's one of Wey's rejoinders, again in The Blot:
Well, now. There are written articles attached to these preposterous illustrations, of course, but the articles are stupid as well as provocative.
Perhaps we should give Wey the benefit of the doubt for his apparent unfamiliarity with U.S. laws pertaining to defamation and libel. As his attorney in the horndog case acknowledged, "We all know Mr. Wey has diarrhea of the keyboard."
Lessons Learned
1. If you are a Swedish former model, do not accept a so-called Wall Street job before spending a couple minutes researching the company and its recruiter on the internet.
2. If your investment advisor suggests some Chinese stocks for you to buy, find a new investment advisor.
3. F. Scott Fitzgerald was right. There are no second acts in Swedish and Chinese lives.
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