NextFin — China’s lithium giant Ganfeng Lithium Co Ltd said on Sunday that a case involving alleged insider trading by the company has been transferred by police to prosecutors for review and possible charges, raising the risk of criminal liability for the firm following earlier regulatory penalties.
In a stock exchange filing, Ganfeng said it had received a notice from the Yichun Public Security Bureau that the case had been handed to the procuratorate for examination and prosecution on suspicion of the crime of insider trading committed by a corporate entity.
The case relates to trading in shares of Jiangte Motor during Ganfeng’s planning in 2020 to acquire a stake in the company, Ganfeng said.
Ganfeng was previously fined by the Jiangxi branch of the China Securities Regulatory Commission (CSRC) in July last year over the same matter. The administrative penalty included confiscation of illegal gains and fines imposed on the company and individuals involved.
Regulators said that between June and early July 2020, during a sensitive period before Jiangte disclosed a private share placement that could have led to a change in control, Ganfeng transferred 30 million yuan into its securities account and bought 15.68 million shares of Jiangte. The shares were sold days later for a profit of about 1.1 million yuan (US$ 150,000), according to the regulator.
Chinese authorities determined that Ganfeng chairman and then president Li Liangbin and then board secretary Ouyang Ming were insiders who had access to material non-public information and were responsible for the decision-making and execution of the trades.
The case was placed under investigation in January 2022. In July last year, regulators confiscated 1.1 million yuan of illegal gains, fined the company 3.3 million yuan, and imposed fines of 600,000 yuan and 200,000 yuan on Li and Ouyang, respectively.
Under Chinese law and guidelines jointly issued by the Supreme People’s Procuratorate and the Ministry of Public Security, insider trading cases involving profits or avoided losses above 500,000 yuan, or transaction amounts above 2 million yuan, may meet the threshold for criminal prosecution.
Ganfeng said the transfer of the case was part of routine judicial procedures following the earlier administrative penalty and that it does not expect the matter to have a material impact on the company’s normal operations.
The development comes as Ganfeng’s plans to list its battery subsidiary, Ganfeng Lithium Battery Technology, appear increasingly uncertain.
Chinese regulations bar listed companies or their controlling shareholders from spinning off subsidiaries for separate listings if they have been subject to securities regulator penalties in the past 36 months.
Ganfeng disclosed in March that it would buy back 4.99 billion yuan worth of shares in the subsidiary from some investors, a move the company said was aimed at facilitating future capital operations and financing.
In 2022, Ganfeng raised nearly 2.7 billion yuan for the subsidiary from external investors and employee platforms, with agreements stating that investors could require a buyback if the unit failed to complete a qualified initial public offering by Dec. 31, 2025, or if regulatory or legal issues made such a listing impossible.
Ganfeng said in its statement that the insider trading case was a historical matter that had already been disclosed and rectified, and that the company had fully paid the fines and implemented corrective measures.
The company reported revenue of 14.62 billion yuan and net profit of 25.52 million yuan for the first nine months of this year, up 5.02% and 103.99% year-on-year, respectively. Third-quarter revenue rose 44.1% and net profit jumped 364.02% from a year earlier, it said.
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