Hong Kong's securities regulator said it has started court proceedings against the chief executive of China Forestry Holdings Co Ltd, which is backed by the Carlyle Group.
The Securities and Futures Commission (SFC) said it had started court proceedings against China Forestry Chief Executive Li Han Chun and had obtained an interim injunction to freeze assets worth up to HK$398 million ($51 million) of Li and his company Top Wisdom Overseas Holding Ltd.
A high court judge on Friday had ordered the interim injunction granted to the SFC on Feb. 2 be extended until March 4, or until further orders from the Court, the SFC said in a statement.
China Forestry, which is 10.96 percent owned by Carlyle, operates plantation forests and supplies timber to the construction, furniture, interior decoration, wood product and paper industries in China.
The SFC said the assets frozen by the interim injunction were equivalent to the proceeds from the sale of China Forestry shares by Li and Top Wisdom in January.
Top Wisdom placed 119 million China Forestry shares at $3.35 each with institutions and funds on Jan. 12 for about HK$398.65 million ($51.17 million).
The SFC launched investigation after China Forestry announced on Jan. 31 that its auditors had identified possible irregularities in the audit process for the financial year ended Dec. 31, 2010.
Trading in China Forestry shares was suspended and remains so at the request of the company. The shares last traded up 1 percent at HK$2.95 on Jan. 26 prior to the suspension, but had fallen more than 18 percent since Jan. 12, immediately before the share sale.
Moody's then downgraded the company to B1 from BA3, with a further downgrade possible, the credit agency said in February.
The SFC said the investigation was continuing.