The U.S. dropped fraud charges against Benjamin Wey, the founder of the private equity firm New York Global Group, after a judge threw out thousands of pages of documents she said were illegally seized by the FBI in 2012.
The dismissal by prosecutors in Manhattan comes less than three weeks after the government surrendered in another high-profile white-collar case. The U.S. last month dropped charges against two former JPMorgan Chase & Co. traders accused of hiding more than $6.2 billion in trading losses on wrong-way derivative bets, after determining they couldn’t rely on the testimony of star witness Bruno Iksil, the Frenchman at the center of the case who was dubbed the “London Whale.”
Wey, who made a career of bringing Chinese companies onto U.S. exchanges, was charged with fraud in connection with three reverse mergers. He was accused of using family members to help him secretly amass ownership of large blocks of stock in companies he took public through reverse mergers and then manipulating the price of their shares. The scheme, which generated tens of millions of dollars, ran from 2007 to 2011, prosecutors said.
Reverse mergers involve using a closely held firm to buy a shell company already public on an exchange, allowing it to list shares without the scrutiny of a public offering.
"I was wrongly charged in the first place,” Wey said in a statement. “This ordeal devastated our employees and our families, has done irreparable harm to our lives and closed our prospering businesses. We are thankful that this judgment will help clear my name.”
Prosecutors said in a filing Tuesday that the case was “based in significant part” on the evidence seized in overly broad searches of Wey’s home and office. U.S. District Judge Alison Nathan ruled in June that the government’s conduct reflected “at least, grossly negligent or reckless disregard” of Wey’s constitutional rights.
During a January 2012 search of Wey’s Wall Street office and apartment, agents seized at least 14 terabytes of computer information and items that included family x-rays, medical prescriptions, documents tied to Wey’s divorce and even his child’s PSAT college test scores. The government kept the property for at least three years.
‘Powerful Reminder’
“This case should serve as a powerful reminder for years to come that the government must adhere to fundamental safeguards of our privacy and liberty when conducting searches,” Wey’s lawyer, David Siegal, said in a statement.
Charges are still pending against Seref Dogan Erbek, a broker in Switzerland who was accused of helping Wey.