Andrew Forrest, who briefly held the title of Australia's richest man last year, could also face a 4.4 million dollar (3.1 million US) fine if the Australian Securities and Investments Commission (ASIC) action succeeds.

ASIC's Federal Court action alleges Fortescue "engaged in misleading and deceptive conduct" by overstating the impact of three Chinese companies in a series of market announcements in 2004.

Forrest was "intimately involved" in issuing misleading, price-sensitive public statements, the regulator's lawyer Neil Young told the court in Perth.

Young alleged that Fortescue clamed it had binding agreements to build and transfer infrastructure ownership with the Chinese firms when it had only agreed to open discussions.

"Both Fortescue and its chief executive were at all times aware of the gap" between its public statements and the preliminary nature of the agreements," Young said, national newsagency AAP reported.

ASIC said the announcements between August and November 2004 saw Fortescue's share price rise from 55 cents to a high of 2.32 dollars less than three months later.

Fortescue's executive director Graeme Rowley said last week that the company would "vigorously" defend itself against the allegations.

The court case is expected to last for five weeks.

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