SILVERCORP
FILES LAWSUIT IN NEW YORK AGAINST STOCK MANIPULATION SCHEME
VANCOUVER, British
Columbia � September 23, 2011 � Silvercorp Metals
Inc. a Canadian based mining company, (�Silvercorp�
or the �Company�) on September 22, 2011 filed a lawsuit in New York County
Supreme Court charging defendants Chinastockwatch.com, Jerry Katz,
Alfredlittle.com, Alfred Little, Simon Moore, and several �John Doe�
defendants with spreading �false, defamatory and fraudulent� information
about Silvercorp on the Internet and in letters to
the media and regulators. Silvercorp charged
that the defendants did so to drive down the price of Silvercorp�s
stock in order to make their short positions in the stock more profitable.
A
�short sale� is a transaction in which a person sells shares the person does
not own, and then borrows the same number shares to deliver when the sale is
formally settled. Ultimately, the person buys the shares, hopefully at
a much lower price, to �cover� or pay off the stock loan. A short
sale�s profitability is determined by how much the stock price drops in
excess of the cost of borrowing the stock.
Silvercorp�s complaint in the casenotes
that during August 2011, market data began to reveal a potential short
selling manipulation scheme. The number of Silvercorp
shares out on loan, jumped dramatically from 3% of total shares outstanding
at the beginning of August to almost 14% at the end of the month. Thus,
by the end of the month short positions in Silvercorp
stock represented approximately 23 million shares. Historically demand
to borrow Silvercorp shares has lagged below peer
companies, but beginning around mid-August, demand to borrow Silvercorp shares surged above that for peer
companies.
Silvercorp charged that, beginning on August 29, 2011
and continuing up to the present, defendants have posted on the
chinastockwatch.com and alfredlittle.com websites and sent anonymous letters
to the British Columbia Securities Commission, the Ontario Securities
Commission, Silvercorp�s auditors at Ernst &
Young, and various financial media outlets that falsely and maliciously
allege that Silvercorp�s financial statements and
its resource deposits were overstated, among other false and defamatory
statements. Following these statements, Silvercorp�s
stock price dropped sharply � as much as 20% in a day on unusually high
trading volumes � before partially recovering as Silvercorp
came forward with information in the form of bank statements, government
records and other documents to rebut the defendants� false allegations.
Silvercorp has sued the defendants for defamation,
unjust enrichment, trade libel and tortious interference, and deceptive acts
and practices. As a result of the conduct charged, Silvercorp
has asked the court to order the defendants to pay compensatory and punitive
monetary damages, to order that the defendants� profits from their short
selling activities should be disgorged to Silvercorp
or imposed with a constructive trust and paid as the court may direct, and to
order the defendants to remove false statements about Silvercorp
from their websites and not to repeat such misconduct, among other relief. Silvercorp is represented in this matter by the law firm
of K & L Gates LLP.
�This
is the first step on our journey to hold participants of this scheme, or
those who otherwise defamed the Company, harmed its shareholders and
manipulated the capital markets accountable� commented Dr. Rui Feng, Silvercorp�s
chairman.
As
previously reported, Silvercorp also promptly
reported defendants� misconduct to law enforcement and regulatory authorities
in both Canada and the United States, and is cooperating with their
inquiries. As further reported, Silvercorp
has appointed a special committee of independent directors, assisted by
independent counsel and KPMG Forensics Inc., to look into the matter.
The independent directors on the committee are Robert Gayton,
an Accounting Ph.D., Paul Simpson, an attorney, and Earl Drake, Canada�s
former ambassador to China.
The
Company has also retained senior legal counsel Leon Getz, Q.C. of the firm of
Getz Prince Wells to assist and facilitate the work of legal counsel to the
Independent Committee. Additionally, Howard Shapray
Q.C. of the firm of Shapray Cramer LLP has
been retained to manage related legal matters in Canada including, the filing
of criminal complaints with the Commercial Crimes Unit and the Integrated
Market Enforcement Team (IMET) of the Royal Canadian Mounted Police, interface
with Securities Regulators to assist them in completing their investigations
to protect the investing public from fraudulent schemes and market abuses, as
well as the filing of legal proceedings in the Canadian courts against
individuals who post false and malicious defamatory statements of and
concerning Silvercorp.
About Silvercorp
Metals Inc.
Silvercorp Metals Inc. is engaged in the acquisition,
exploration, development and mining of high-grade silver-related mineral
properties in China and Canada. Silvercorp is the
largest primary silver producer in China through the operation of the four
silver-lead-zinc mines at the Ying Mining Camp in the Henan Province of
China. The Company is developing its GC silver-lead-zinc mine in the
Guangdong Province and recently acquired the BYP gold-lead-zinc mine in Hunan
province. In Canada, Silvercorp is preparing to
apply for a Small Mine Permit for the Silvertip high grade silver-lead-zinc
mine project in northern British Columbia to provide a further platform for
growth and geographic diversification. The Company�s shares are traded on the
New York Stock Exchange and Toronto Stock Exchange and are included as a
component of the S&P/TSX Composite and the S&P/TSX Global Mining
Indexes.
For further information:
SILVERCORP
METALS INC. Rui Feng,
Chairman/CEO & Lorne Waldman, Corporate Secretary Phone:(604) 669-9397,
Toll Free Phone: 1-888-224-1881 Fax: (604) 669-9387, Email: info@silvercorp.ca, website: www.silvercorpmetals.com.
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