A recent release of "2025 Financial Trial Representative Cases" by the Shenzhen Intermediate People's Court included a case where an individual investor, surnamed Lin, sued a defendant, surnamed Yi, for losses incurred during the manipulation of Sanfo Outdoor Products (002780.SZ) stock. Following third-party calculations, Lin was awarded compensation totaling 157,169.56 yuan.
The defendant, Yi Wei, a former director of Sanfo Outdoor and a once-prominent social media influencer, was previously fined and ordered to disgorge illegal gains summing 99.8034 million yuan for charges related to securities market manipulation and illegal stock recommendation, drawing significant attention in the capital markets.
The Shenzhen Intermediate Court stated that this case provides a valuable exploration of adjudication rules for disputes concerning liability for securities market manipulation. It offers rule guidance and a judicial precedent for protecting investor rights, comprehensively combating market manipulation, maintaining capital market order, and ensuring high-quality development of the capital markets.
The case against the former director, Yi Wei, involved two primary offenses. On August 13, 2021, Sanfo Outdoor announced that its director, Yi Wei, had received a "Case Filing Notice" from the China Securities Regulatory Commission (CSRC) on the same day. The notice stated that Yi was under investigation for suspected manipulation of "Sanfo Outdoor" stock and illegal engagement in securities investment consulting activities, with the decision to formally investigate dated July 30, 2021.
Subsequently, the CSRC disclosed details of the case. Yi Wei had served as a director of the Shenzhen-listed Sanfo Outdoor from February 2, 2021, to August 13, 2021, after which he resigned from the board following the CSRC's investigation.
An administrative penalty decision revealed that Yi Wei was a co-founder and CEO of Shanghai Chunshan Xintang Investment Management Co., Ltd. According to the Asset Management Association of China, Chunshan Xintang was established in 2015, with assets under management in the range of 0-5 billion yuan. It managed five products, three of which had been liquidated, while the remaining two had instances of incomplete annual report disclosures.
Fund products under Chunshan Xintang were one channel used by Yi Wei to trade Sanfo Outdoor shares. The penalty decision stated that based on evidence including fund correlations, trading hardware links, and interrogation transcripts, it was established that from November 1, 2018, to June 19, 2020, Yi Wei effectively controlled 76 securities accounts through direct control, entrusted management, and borrowed margin accounts. This account group was used to trade Sanfo Outdoor stock.
Details from the penalty decision showed that between April 17, 2019, and June 19, 2020, Yi Wei manipulated the stock price of Sanfo Outdoor in four distinct phases. He concentrated on using his capital and shareholding advantages for continuous buying and selling, and conducted trades between accounts he actually controlled.
During the 398 trading days from November 1, 2018, to June 19, 2020, the涉案 account group executed buy orders on 365 days and engaged in trades between its own controlled accounts on 329 days. The proportion of wash trades conducted by the account group reached a peak of 25.14% of the market's competitive trading volume. The CSRC concluded that Yi Wei acted with the intent to influence the price of Sanfo Outdoor stock, primarily by issuing trading instructions to traders under his control at Chunshan Xintang, directing them to influence the stock's price and trading volume using capital and shareholding advantages at specified times and prices. The account group ultimately realized illegal gains of 27.9706 million yuan, leading to the conclusion that Yi Wei's actions constituted securities market manipulation.
Beyond profiting from secondary market manipulation, Yi Wei also engaged in direct solicitation. On May 26, 2020, he launched a social media account promoting his background as a Yale University graduate with extensive investment experience and claimed to be a manager of large US dollar funds. He subsequently used additional accounts to coordinate with his main account, promoting his investment theories and providing specific investment recommendations.
According to the penalty decision, from May 26, 2020, to March 15, 2021, Yi Wei, without obtaining the required approval for securities investment consulting services and lacking the necessary qualifications, used his social media account to recruit members by offering access to an "investment education" group and providing contact details. Through social media and messaging apps, he offered services including stock recommendations, market predictions, and trading guidance. The investigation confirmed that 534 individuals joined his consulting group and paid membership fees to his designated bank account, generating illegal income of 23.9422 million yuan, supported by evidence such as account data, screenshots, emails, fund flows, and interrogation records.
Considering these violations collectively, the CSRC confiscated Yi Wei's illegal gains of 27.9706 million yuan from market manipulation and imposed an additional fine of 27.9706 million yuan. It also confiscated his illegal income of 23.9422 million yuan from unlicensed investment consulting and levied a fine of 20 million yuan, resulting in a total penalty of 99.8034 million yuan.
The Shenzhen Intermediate Court viewed this case as establishing a precedent for civil compensation related to market manipulation. The court determined that Yi Wei's actions, utilizing capital and shareholding advantages for continuous trading and conducting trades between controlled accounts, constituted securities market manipulation. Based on the facts established in the administrative penalty decision, the manipulation period was defined as starting on November 1, 2018, and ending on June 19, 2020. Using the manipulation end date as a reference point and drawing on principles from relevant judicial interpretations regarding the dissipation of manipulation effects, the court set July 14, 2020, as the date the manipulation's influence was eliminated.
On August 14, 2021, Sanfo Outdoor announced that its director had received a case filing notice and resigned, explicitly disclosing the investigation into suspected stock manipulation. Therefore, the first trading day after this announcement, August 16, 2021, was designated as the "disclosure date" for the manipulation scheme.
In this case, all of investor Lin's transactions occurred before the disclosure date of August 16, 2021, and after the influence elimination date of July 14, 2020. The court found that Lin was unaware of the manipulation and acted in good faith. Furthermore, as Yi Wei failed to provide evidence to rebut the presumption of a causal link between the trading and the manipulation, the court applied the presumption of transactional causation. Consequently, the court ruled that Yi Wei must compensate Lin for his investment losses, which were calculated by a third party at 157,169.56 yuan. Yi Wei appealed the decision, but the Guangdong High Court dismissed the appeal and upheld the original verdict.
Regarding the case's significance, the Shenzhen Intermediate Court noted that there is a lack of detailed normative documents or judicial interpretations providing specific adjudication rules for civil compensation cases involving market manipulation. This case, by adopting the start and end dates of the manipulation period as determined by the administrative regulator, argued for the reasonableness of referencing relevant judicial interpretation principles to determine the date of influence elimination. It also proposed that the disclosure date of the manipulation could impact the determination of transactional causation for investors. If the disclosure occurs before the influence elimination date, trades made by investors between the disclosure date and the influence elimination date might not be considered causally linked to the manipulation.
Therefore, the court concluded that this case represents a beneficial exploration of adjudication rules for disputes over liability for securities market manipulation. It provides rule guidance and a judicial model for protecting investor rights, implementing multi-faceted打击 against manipulation, maintaining capital market order, and supporting high-quality development in the capital markets.