BUSINESS

Big banks to pay $32.5 million to settle Sino-Forest lawsuit by investors

01/26/2015 03:48 EST | Updated 03/28/2015 05:59 EDT
TORONTO - Several Canadian banks and other large financial institutions that helped Sino-Forest Corp. raise millions in the financial markets have agreed to pay $32.5 million to settle a lawsuit by investors who lost money when the Chinese forestry company collapsed amid allegations of fraud.

The case alleged directors, officers, auditors and underwriters at the timber company misled investors with its accounting.

The allegations have not been proven in court.

The agreement, which does not include any admission of wrongdoing, includes Credit Suisse Securities (Canada) Inc., TD Securities Inc. (TSX:TD), Dundee Securities Corp., RBC Dominion Securities Inc. (TSX:RY), Scotia Capital Inc. (TSX:BNS), CIBC World Markets Inc. (TSX:CM), Merrill Lynch Canada Inc., Canaccord Financial Ltd. (TSX:CF) and Maison Placements Canada Inc.

The once Toronto-listed company, which held timber assets in China, saw its stock climb to a peak market capitalization of more than $6 billion.

However, the stock plunged after it was accused of being a Ponzi scheme by Muddy Waters Research, prompting investigations by the Ontario regulator and the RCMP.

Sino-Forest filed for creditor protection in 2012 and is now controlled by its bondholders under a different entity called Emerald Plantation Holdings Ltd.

The settlement follows earlier deals with former Sino-Forest chief executive David Horsley and the firm's former auditors, Ernst and Young.

Horsley agreed to pay $5.6 million to settle the lawsuit against him, while Ernst and Young paid $117 million to settle the class action case.