Chinese Reverse-Merger Firms Outperform U.S. Peers, and are TOP NOTCH investments Study Says “We don’t trust their pet food, we don’t trust their toys, we even caught a few of them, so why should we trust their reverse mergers?,” Lee said. “But the pool coming out of China is just a better group.”..Charles Lee, an accounting professor at Stanford’s prestigious Graduate School of Business says Chinese Reverse Merger companies outperformed US peers. Looks like you guys know who to call next time your peddling some Chinese reverse merger stock.
The General..as in General Wesley K. Clark, former Chairman of Rodman & Renshaw was recently questioned regarding his former firm's China deals ABC News caught the General off guard..Many folks, present company included believe he was being used as a highly paid figure head, while Rodman's day to day management called the shots.
Catapillar's (NYSE: CAT) massive China fraud headache may have actually been a joint-American effort with local Chinese..A HK shell company is in question..Catapillar wrote down an almost unthinkable $580 million collosal error in judgement aquiring a Chinese mining equipment firm last year called Siwei. Siwei as it turns was a HK-listed shell company controlled by Emory Williams is a former chairman of the American Chamber of Commerce in Beijing. The other principal is James Thompson III, the son of billionaire James E. Thompson, chairman of Crown Worldwide Group, a relocation company in Hong Kong..American and Chinese business, the worst of both worlds come together in another sick twist in the murky underworld.
ZSTN Digital Networks in the spotlight as Delaware judge votes in favor with US investor Peter E. Deutsch..Delaware judge grants a 'put option' on Mr Deutsch's 3.9 million shares @ $8.21 That's a whopping $32.3 million! Unfortunately for Mr. Deutsch, and as we have all come to expect, the Chinese don't keep assets state side (go figure). They weren't even willing to provide their auditors at BDO with year end bank statement balances (how is it that the CSRC (China's version of the SEC) for all these scandals are compelled to do nothing??)
Hedge Fund Manager Fined $44 Million in China Scheme SEC charges a Miami-based entrepreneur for defrauding investors against a hedge fund manager for trading illegally in Chinese stocks..Sung Kook “Bill” Hwang of Tenafly, N.J, of Tiger Asia Management and Tiger Asia Partners, two New York-based hedge funds & Raymond Y.H. Park, of Riverdale, N.Y--Sounds like these two are Koreans.
Carson Block says all the meat's gone off the bone.. Muddy Waters Retreats on Short Selling Chinese Stocks..Carson Block says it’s become too difficult to short Chinese equities in the U.S. as bets on stock declines drop by 50 percent from a year ago.
SEC charges consultant with fraud in Chinese reverse mergers The Securities and Exchange Commission charges against Huakang "David" Zhou and his firm, Warner Technology and Investment Corporation, is the latest action by the SEC as cracks down following a rash of accounting scandals at U.S.-listed Chinese companies..."it's Chinatown Jake"..
Why Is The SEC Pursuing Deloitte? Two words: Longtop Financial..a Goldman Sachs IPO
PCAOB Makes Tentative Progress on Chinese Audit Firm Inspections “To date, 67 of these China-based issuers have had their auditor resign, and 126 issuers have either been delisted from U.S. securities exchanges or ‘gone dark’—meaning that they are no longer filing current reports with the SEC.
Chinese Medical Firm Sued by SEC Over Phony Weight-Loss Product..China Sky One released a statement in February saying that Chief Executive Officer Yan-qing Liu who certified the false statements was being treated for a life-threatening illness and that the time he would spend working would be “substantially reduced.”Hahahahaha..why yes of course.
Can Chinese Stocks Make It In The Big League?As of September 6, 2012, the index value year to date has dropped by 7.5% and by 22.5% over the past year; which indeed speaks about a weak performance with not much hopes of improvement.
Old news but worth noting...China Century Dragon Media Shareholder Class Action...Case DISMISSED!..."The Court concluded that the plaintiffs failed to state a claim for which relief could be granted". Because the company is located...wait for it...in CHINA..no US legal jusrisdiction..no assets on US soil.
6/28/12 Universal Travel Group a Shenzhen, China-based travel services provider, said its chief operating officer resigned along with three other members of its board of directors.. On June 23, 2012, Mr. Jun Liu, Ms. Moling Shang, Mr. Lizong Wang and Mr. Lawrence Lee tendered their resignations from the board of directors (the “Board”) of Universal Travel Group (the “Company”), the Audit Committee, the Compensation Committee and the Nominating Committee of the Board, effective immediately. Mr. Jun Liu also resigned his position as Chief Operating Officer of the Company, effective immediately. The resignations of Mr. Liu, Ms. Shang, Mr. Wang and Mr. Lee are for personal reasons and not in connection with any known disagreement with the Company on any matter.
5/10/12 The Bloomberg Chinese Reverse Mergers Index, is now worth $5.9 billion compared with $13.5 billion a year ago Bloomberg Chinese Reverse Mergers Index down 44% in 2011..
The SEC says China Shenghuo can't go dark..Ain't gonna happen..
4/22/12 China Shenghuo Announces Receipt of Deficiency Notice and Voluntary Delisting from NYSE Amex LLC and Deregistration with the SEC After being given the greenlight to be requoted, China Shenghuo Pharmaceutical Holdings says FUC*K it! DELISTINGS of Chinese stocks is now more common than listings....Pink Sheets here we come!
4/19/12 China's Universal Travel Group Announces Its Intent to Delist From NYSE UTA after being halted for a year on the NYSE due to dubious financial records and a travel website that doesn't work, delists it's shares for good..investors just got FUC*KED..again..where's the arrests? Universal Travel Group, (UTA) the destroyer of shareholder value.."Why didn't you just ask me to put my money in a pile in a corner and give you a match?"- Marc Ridley
Investor Distrust of Chinese Listings Hits IPOs, Prices At least six disputes have broken out this year between auditors and Chinese companies “There has absolutely been collateral damage. Unfortunately, having big-name auditors and bankers behind a company doesn’t guarantee it’s free of issues.”-Kevin Pollack, a fund manager at Paragon Capital LP
GREAT QUESTION- Why Do We Put Up With China's Nonsense? Chinese scammers and manipulators steal American IP
Happy Chinese New Year--Good Times! Happy Chinese New Year--Don't be a fool, gamble your money on a casino table..the odds are better than your luck in a Chinese stock
9/30/11 Somebody turn off the lights Stocks Collapse at End of Worst Quarter Since the Crisis, Led By Economically Sensitive Sectors The Dow tumbled more than 240 points to about 10913, falling back below 11000 and losing more than 12% on the quarter, its worst since falling 13% in the first quarter of 2009
Chinese Stocks Plummet on News of Justice Department Inquiry Chinese Internet companies were particularly hard hit, including Youku and Tudou, Chinese video posting sites, as well as Baidu, Sohu and Sina, also Internet stocks. The share prices of a number of reverse merger companies fell sharply on Thursday, including AgFeed Industries and China Auto Logistics
8/23/11 “We weren’t cheated by an individual, it was an organized scheme" Chinese Protest $5 Billion Losses Tied to U.S Reverse Mergers --For those who think the fraud was isolated to a few lousy auditors, take heed: The China fraud goes deep and the Chairman is to blame in many cases of outright fraud and financial chicanery..For the first time we get a good look at Chinese citizens who have been victimized by Chinese fraud in reverse mergers, such a sad tale..for both sides of the Pacific, hope you have a tissue on hand
8/2/11 More U.S. lawsuits target Chinese reverse mergers 24 lawsuits target Chinese reverse mergers--"There is a big difference between winning a lawsuit and collecting money because you won a lawsuit"-Joseph Grundfest, Stanford law professor and former SEC commissioner
7/20/11 The veteran fund manager Anthony Bolton has admitted that he may have been caught out by Chinese fraudsters China Integrated Energy, one of the firms, lost 90 per cent of its market value this year after being accused of fraud by short-sellers
7/11/11 Blackrock releases a report on China titled "Can China's Savers Save The World?" A case of Panda bears vs the Panda lovers many commentators anticipate that the rapid nature of Chinese credit growth, allied to a capital allocation process led by political direction and undertaken at highly subsidized rates of interest, will inevitably end in a credit bust : (
A Step in the Right Direction! China Said to Discuss Allowing SEC Probes of Mainland Firms for First Time Representatives from the Securities and Exchange Commission and the Public Company Accounting Oversight Board will meet with counterparts from the China Securities Regulatory Commission in Beijing from July 11 to 12
6/30/11 Margins, revenues too good to be true? Websites don't work? Return on capital that defy common sense? Sounds like a Chinese Reverse Merger..
6/28/11 The Bloomberg China Reverse Mergers Table There would have been a lot more on this list but as you are aware, many have been DE-LISTED/STOPPED TRADING THE CHINESE Reverse Mergers HALL OF SHAME
The illusion of large cash balances in Chinese RTOs Are cash balances being faked in such clever and elaborate schemes across the Chinese RTO space? China Biotics' Fraud Casting Doubt on All Chinese RTOs--BDO claims that China-Biotics committed "illegal acts" including document forgery and an elaborate scheme in which BDO's auditors were directed to a "suspected fake website" when BDO attempted to verify China-Biotics' cash balance with the company's bank.--CHINESE REVERSE MERGERS TURN AMERICAN INVESTOR MONEY INTO HAMBURGER MEAT--What next?
Legendary hedge fund manager John Paulson takes massive loss in Sino-Forestry Sino shares plummet (AS IN CUT IN HALF! TSE:TRE $1.53 --down $1.20 (-43.96%) ) as Paulson dumps stake John Paulson--FOREST FIRE!!!--Investors are getting mowed down in a blaze, confidence has been lost, thank you China.
China Regulator ‘Aware’ of Concerns on Chinese Firms’ Accounting From the US to Canada to HK, Chinese stocks are under fire by regulators for fraud Shares of Real Gold Mining Ltd. (246), a Chinese gold producer listed in Hong Kong, have been suspended since May 27 after the South China Morning Post said the company may have filed two different sets of accounts--Two sets of books...NICE!!
6/21/11 A disturbingly FALSE news release was sent out by some sleaze bag claiming Muddy Waters LLC was under investigation by the SEC NOT TRUE!!! The Wall Street Journal reported a false report that was confirmed as false by the SEC that someone released regarding an investigation of Muddy Waters LLC by the SEC--Quite frankly, Muddy Waters LLC has done more homework on Chinese reverse mergers than people who were paid to do so--like the bankers, the auditors and the advisors! Carson Block uncovered a lot of malfeasance at Chinese firms while these bankers, auditors and advisors just wanted to cash a paycheck.
6/21/11 Key partner casts doubt on Sino-Forest claim Sino-Forest's partner is throwing them under the bus
Sino-Forest Corp. (TRE-T3.19-0.15-4.49%), once Canada’s biggest publicly-traded timber company down a STUNNING 82 per cent since Muddy Waters LLC revealed inconsistencies with their holdings.. According to figures provided by senior forestry officials and a key business partner there, Sino-Forest Corp is looking quite dubious. DON'T DRINK THE KOOL AID!
6/13/11--Auditor Outrage It's pretty clear these auditors are running for the hills It is not clear why auditors don’t bear some responsibility to make public disclosure when issues arise regarding the relationship with the company
Chinese investments losing friends fast Chinese issuers have a knack for losing friends "It's more of a blow to China as an investment than to fund managers."--Chinese fraudsters are making life difficult for anyone in China who is actually legitimate
Big funds get slammed in China John Paulson, Fidelity Investments to Carlyle Group Where are the customer's yachts?? It's really surprising to see so much big name money went into these Chinese stocks..
6/8/11-- Interactive Brokers says NO Chinese stocks here Interactive Brokers Group Inc. is barring its clients from using borrowed money to buy the shares of more than 130 Chinese companies Chinese stocks are no longer on the menu @ Interactive Brokers
6/3/11 -- Sino-Forest Denies Short Seller’s Accusations A very interesting battle is brewing between Muddy Waters and Sino-Forest, a Toronto-listed HK company Sino-Forest stock is taking a severe beating down 60 percent to C$5.77 at 11:51 a.m. in Toronto Paulson & Co., John Paulson’s New York-based hedge fund that made $15 billion in 2007 betting against subprime mortgages, owned 34.7 million Sino-Forest shares as of April 29, according to data compiled by Bloomberg.
The Bloomberg China Reverse Mergers Index Taking a serious beating--look at the chart The WHEELS FELL OFF THIS BUS
6/2/11 The SEC probes Chinese auditors--I hope they probe deep This is what happens when you farm out your work to local mom & pop Chinese audit firms--you get some shoddy results
The future looks murky for Chinese reverse mergers Chinese RTOs have a shaky future ahead Probably something you know by now..well..here it is anyway.
5/26/11 The Audacity of Chinese Frauds --Longtop Financial went dark, this was not a reverse merger, in fact it was an IPO by Goldman Sachs and Deutsche Bank (Morgan Stanley was a lead manager in a 2009 offering of more shares) Serious accusations that fraud in China is being facilitated by local banks, payoffs, etc--Goldman Sachs & Hank Greenberg, the former chairman of American International Group get swindled in Chinese stocks
Chinese do a number in London--what the bloody hell?? The Chinese reverse merger scandal comes to the UK Vision Opportunity China, a London listed small cap fund focused on China has decided to call it a day--Cheers!
The Top 10 Worst Performing Stock IPOs of 2011 8 out of the 10 are guess who--CHINESE stocks! Yay! The worst one? China Shengda Packaging Group (NASDAQ:CPGI): The shares were offered at $4 and recently traded at $1.18, for a decline of 70.5% --speechless
5/23/11 You think there's some guy in China who lost money investing in US stocks saying "Americans make hamburger meat with our investment capital" Chinese Reverse Mergers Make Chop Suey Out of Investor Capital --It's not surprising people are getting racist tones bubbling to the surface now about losing money in reverse mergers, people get frustrated--whatever helps you deal with your loss I guess
5/17/11 Chinese Stock Frauds In case you're wondering, the fraud is not unique to the US capital markets This page illustrates the extent to the frauds that have been executed around the world by Chinese fraudsters--What is really surprising is that 45% of the auditors were Big Four and Top 10 audit firms--hmm..draw your own conclusions here.
Awkward moments in history brought to you by NASDAQ Tao Li, the chairman and founder of Kingtone Wirelessinfo gets to ring the bell @ NASDAQ Li is also the chairman and founder of China Green Agriculture a company accused of fraud --The SEC also launched an "informal inquiry" into China Green last Sept 2010
Yahoo's looking more and more incompetent by the hour Turns out Yahoo might have known more earlier than previously disclosed, shareholders are ripping their hair out trying to find out why Yahoo mgmt failed to disclose Alibaba's decision to snatch Alipay from Yahoo How much did Yahoo know and when is the question--sounds like a cluster fuck--Honestly, what do you expect? These guys rejected Bill Gate's offer a few years ago @ $37, thought they could take on Google, 'cough' 'cough'..sure.
5/13/11 Yahoo gets a taste of China Yahoo wakes up and finds out that their crown jewel Alipay was snatched illegally by legendary Jack Ma Looks like Yahoo is ASSED out on this one, Jack Ma is eating Yahoo's main course and high fiving his buddies around the water cooler --Got one word for you Yahoo--Welcome to CHINA!
Xinhua Finance Founders Charged The folks at Xinhua Finance show us that you don't have to be a Chinese national to start a Chinese company and perpertrate it into a scam Sleazebag Americans manage to defraud investors and get themselves busted--Proof you don't have to be Chinese to run a Chinese scam, just straight stupid.
5/11/11 Chinese Reverse Merger Stock Halts To Halt Or Not To Halt--that is the question! Frustrations build up because these stocks are halted and cannot trade--George Valente, an 85-year-old retired auto dealer in Northern California show that Mr. Valente owns more than 10% of outstanding shares in Chinese travel company Universal Travel Group, (UTA) making him the largest single investor in the company outside of China--WOW..
5/9/11 Universal Travel Group under investigation Cohen Milstein Sellers & Toll PLLC Announces Investigation of Universal Travel Group, Inc. (UTA) What this?? More lawyers sniffin around looking for an angle to sue UTA--If I can get a dollar for every time this has happened to a Chinese Reverse Merger company I'd be rich by now.
5/6/11 Barron's SEC Reports on China Reverse-Mergers Barron's says "Chinese businesses blew up like firecrackers"--do I sense some racial undertones here? Really guys?
The Empire Strikes Back the SEC revoked the securities registration of eight Chinese companies SEC says since March 2011, more than 24 Chinese companies have filed 8-K's where their auditors resigned or disclosed accounting problems--OY VEY!!
5/5/11 Duoyuan Global Water Investigation Committee Takes a Hike On a scale of bad shit, this ranks up there with the Fukushima nuclear meltdown
The Wall Street Journal says "If you want to invest in a Chinese company, maybe you're better off doing it in China" WSJ article says the Chinese have "a piratical entrepreneurial spirit" --WOW that just about sums it up right there.
Longtop Financial Technologies Limited (NYSE:LFT) (Not a reverse merger) Old boy John Hempton of Bronte Capital has a hard on for Longtop Financial, says it smells fishy Hempton says that China is like "A riddle wrapped in a mystery inside an enigma you might say - but that was said about a previous superpower"
SEC Halts Ponzi Scheme by Co-Founder of China Voice Holding Corp. An $8.6 million Ponzi scheme puts an end to China Voice WHAT THE HELL??--What the hell is the matter with people?
China Forestry Holdings Co. Ltd A new poster child for all that's wrong--CEO gets himself arrested for stealing US$4.6 million. Carlyle Group and Switzerland-based Partners Group taking a massive $417 million loss--HOLY FUCK NUTS!
5/1/11 The Rosen Law Firm Rosen has 16 lawsuits active against China-based companies, including former reverse merger companies RINO International, Orient Paper, Gulf Resources, China MediaExpress Holdings and China Agritech. I wonder how they're going to collect--seeing as US Law has no bounds in China
5/1/11 Breaking News..OSAMA BIN LADEN DEAD..after 10 years we find he's been hanging out in a million dollar mansion--not in a cave Better late than never! GO USA!
Chinese Reverse Merger Companies Chinese Reverse Merger Companies Fail to Understand US Regulations and SEC Registration Requirements Attorney Laura Anthony,Founding Partner, Legal & Compliance, LLC Writes about the pitfalls of Chinese reverse mergers and how China does not follow Generally Accepted Accounting Principles (GAAP) which can lead to confusing financial statements and problems with information being provided to US auditing firms.
4/29/11 Universal Travel Group Inc (NYSE: UTA) Universal Travel Group lawsuits are comin' in HOT Lieff, Cabraser, Heimann & Bernstein, LLP Announces Class Action Lawsuits Against Universal Travel Group -Call your girl Sharon M. Lee of Lieff Cabraser toll free at (800) 541-7358.
Universal Travel Group Inc (NYSE: UTA) Another day, another lawsuit for Universal Travel Group Lawyers are all over this like a free steak & lobster buffett at a Las Vegas casino--Glancy Binkow & Goldberg LLP, Representing Investors Who Purchased Universal Travel Group, Inc., Announces Class Action Lawsuit and Seeks to Recover Losses
Universal Travel Group Inc (NYSE: UTA) Universal Travel Group Inc. Announces That It Cleared Acceptance Procedures by EFP Rotenberg & Co, LLP UTA stock is still not trading as of 4/29/11
Gulf Resources, Inc. (NASDAQ:GFRE) The Gulf says recent allegations of fraud by Glaucus are not true Gulf Resources Responds to Allegations--check it out here
Glaucus Research Puts a Strong Sell rating on Gulf Resources, Inc. (NASDAQ:GFRE) and a $0.00 price target WOW! How generous! a $0.00 price target! NICE!--Glaucus says if you own this turd, you are holding worthless paper
Steven Wegener says ZSTN is a complete fraud! Wegener, LLC claims ZST Digital Networks has engaged in widespread fraud in its representation of its business to US nvestors He says there are 3 major parts to ZSTN's fraud, but honestly, even if 1 of the 3 are true, ZSTN will no longer exist
China Agritech (CAGC) LM Research or Lucas Mc Gee Research says China Agritech's business 'barely exists' LM Research claims that China Agritech's revenue numbers were 'made up from thin air'
China Agritech targeted as a fraud China Agritech fired two auditors in four months, is late in filing 2010 financial data and announced on April 18 that Nasdaq was planning to delist it. “China Agritech: A Scam” by Lucas McGee Research
4/26/11-Faruqi & Faruqi LLP Lawyers at Faruqi & Faruqi LLP are looking for shareholders who got BBQ'd in ZSTN stock call your boy Anthony Vozzolo toll free, at 877-247-4292 or 212-983-9330 or by sending him an email at email@example.com.
ZST Digital Networks, Inc Chairman writes a touching letter to shareholders explaining how short sellers conspired to take his stock down 2 separate law firms have announced investigations into ZSTN--4/25/11
NASDAQ wants to delay Reverse Merger listings FINRA wants `$4 for 30 of the first 60 days after they apply for a listing on a major exchange SEC is said to require companies using a reverse merger to become public to spend a minimum of six months trading over-the-counter
Reverse Mergers Reporter says pushers May Be The Problem Walter Pavlo connects the dots with MaloneBailey and Westpark-- WestPark's WRASP--The wheels fell off the bus
Back From The Dead? 4/14/11 Universal Travel Group Inc. Appoints EFP Rotenberg & Co, LLP as Independent Auditors Universal Travel Group says there's a new auditor in town..--UTA stock still not trading
Mecox Lane IPO COLLAPSES (NASDAQ:MCOX) Credit Suisse Group AG and UBS took this one public and investors got JACKED, SUCKER PUNCHED..(whatever you wanna call it) after a strong opening... Mecox ADS declined $6.73 or more than 57% over two trading days--shareholder lawsuits galore
Glaucus Research said STRONG SELL on Universal Travel Group (UTA) on March 7th, 2011 Glaucus Research put a STRONG SELL on UTA, told the last investors in this pig to shut off the lights..Universal Travel Group..accused of fabricating earnings, bogus numbers & a website that doesn't work--NICE!!
Carson Block of Muddy Waters "In China many of these companies aren’t considered a scam"..Carson Block says Chinese fraudsters beware--Muddy Waters points out that what flies in China won't fly with investors in the US.
Universal Travel Group (NYSE Amex: UTA) 4/12/11 Halted for trading--not looking too hot--..Tretcherous..what else can be said about this?--Universal Travel Group..HALT NEWS LAST..3.96--UPDATE 4/13/11..Auditors quit UTA, refused to sign off on audits.
PUDA Coal Chairman 4/11/11 Committed massive fraud..(NYSE Amex: PUDA) PUDA COAL Chairman executes fraudulent transactions-steals company-- from US shareholders
SEC: Many Foreign Companies In U.S. Are 'Vessels Of Fraud' SEC comments on China reverse mergers --end result? Nothing you probably didn't know already by now
TheStreet.com Reporter Herb Greenberg having a field day with Chinese reverse mergers Herb Greenberg: China Stock Action Heats Up
Duoyuan Global Water HALTED..4/6/11 (Public, NYSE: DGW) DGW's board has broadened a third-party review of its business practices that began in September and established a special investigation committee to oversee the probe. Duoyuan Global's shares closed Tuesday at $3.21 and were halted early Wednesday.
Duoyuan Global Water (Public, NYSE: DGW) Getting body slammed by Muddy Waters. Duoyuan stock is down more than 27% (4/4/11) and aftermarket trading doesn't appear any better for it. Muddy Waters says the company has been lying about actual revenues and that their auditors are idiots
Keyuan Petrochemicals, Inc. (Public, NASDAQ:KEYP): Keyuan Petrochemicals, Inc. announced that it has not completed its 2010 consolidated financial statements by the March 31, 2011, deadline. The Company has applied for an extension with the SEC and is required to file the Annual Report by April 15, 2011. The Company will reschedule its earnings conference call to align with the revised reporting date. Details regarding the earnings announcement and conference call will be provided at the appropriate time. --don't hold your breath
We believe in Reverse Mergers as a viable, credible route to a public listing and access to capital and hope this platform can address in some small way, big issues that has affected reverse mergers, Chinese ones in particular. It is important to understand and separate blame, the reverse mergers process/concept itself are NOT to blame, but the management(s) of these Chinese issuers and shifty audit firms in China that delagated work to dubious local mom & pop shops.
Reverse mergers transactions have had a long positive history in America. Companies like Blockbuster, Muriel Siebert, the New York Stock Exchange, Berkshire Hathaway and most recently, American Apparel have all gone public through a reverse merger. It has been a more affordable and convenient way for many smaller companies under the radar of larger investment banks to go public. Back in the 1980s unscrupulous brokers/advisers/promoters and bankers sought inactive shells for the purpose of engaging a reverse merger with an operating business, it allowed them to take cheap stock in deals and when the underlying company got listed, they would promote/sell the hell out of it, swindling unsuspecting investors. Long story short, many investors got fleeced every time and the brokers/advisers/promoters made off with their money. The SEC began cracking down on this insidious activity over the past two and a half decades by shutting down several shady investment firms (Blinder, Robinson & Co, Stuart-James Co., Chatfield Dean Co., First Jersey Securities, etc, etc) and writing new laws and restrictions to prevent such occurrences in the future. For many years, it was deemed ‘dirty’ and carried a stigma for a company to engage in a reverse merger.
In the early 2000s, heralded a new era of growth but the smallest of issuers who could not qualify to hire a mainstream investment banker. With the rise of China, the reverse mergers segment had made a comeback; this once looked down upon, esoteric method of going public has received some respect due to the nature and quality of companies that are being brought to market in the US through reverse mergers transactions. That's what most people thought when China revived the reverse mergers business. This however turned out to be a most difficult story because far too many Chinese companies that executed reverse mergers transactions had compromised financial statements which were largely unknown at the time. There were some very high profile cases of fraud and mismanagement, illegal use of funds and questionable reporting standards as well as accounting fraud. These are serious crimes in the United States of America, however being that management of these companies are living in China that has NOT lead to any
persecution. Enforcing fraudulent activities committed by Chinese management is a challenging problem. There have been a significant rise in Chinese reverse merger fraud. Companies such as CCME (China Media Express), UTA (Universal Travel Group), NIV (NIVS Multimedia Technology), CDM (China Century Dragon Media) and RINO (RINO International) are just a few of many Chinese companies who have lost credibility with US investors. The fact that this has become widespread over the past few months is systemic. Chinese issuers have duped auditors with phony numbers and false records of tax records and inflated land deals, etc. We should also recognize that Chinese management are not afraid of stealing US investor money since there has been ZERO recourse against such action. The SEC and US law does not hold any jurisdiction in China. Furthermore, China-side regulators are not cracking down on these frauds being committed overseas perhaps because they are not stealing money from China-state owned businesses. There
are ZERO cases where an actual execution has taken place of a Chinese issuer's management who has been found guilty of defrauding US investors but there has been a case where management was sentenced to death in China for stealing local government funds however (Mr. Jun Yin, Mr. Tongju Zhou and Mr. Duo Wang, of Fuwei Films (Holdings) Co. Limited (Nasdaq: FFHL). Many Chinese scammers are living large by perpertrating these accounting schemes with local audit firms who provide shoddy work detail. The end result is that these China stocks get delisted from US markets and investors get totally
fucked screwed. However, Chinese management still own the underlying assets, which may in fact in many cases be viable businesses, can then re-list on a regional Asian exchange or domestic exchange in China..potentially for Act II but that doesn’t mean US investors have any promise on any continuity of shareholdership in a potential new listing because these Chinese companies used an offshore legal
mechanism to get listed in the US in the first place, the shares that US investors ultimately own are not of the Chinese operating company but the US holding company based in Delaware, Nevada, etc. They can be likely be disengaged through legal means by their Cayman Islands legal counsel. So be aware of that.
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The accusations of fraud happening within China has been swift and formidible. Most recently, several China-focused investment firms in the US have dropped coverage on China stocks. Their research departments have been under fire for losing sell-side & buy-side clients tons of money. Our hope is that this fraudulent activity comes to an abrupt end and that the CSRC (China's version of the SEC) will begin to make some substantial enforcements. The death penalty could be a good deterrent for fraud, but many doubt the viability of such a response (It wouldn't be a bad idea). What we need are regulators that can go after the crooks who fabricate phony numbers because in the end, all Chinese companies will pay the price, many are already paying by way of commanding low PE's, not getting proper sponsorship and institutional investors getting fed up with the fraud and dumping stock. Additionally, it is the auditor's responsiblity not to rubber stamp every document an issuer gives them, many auditors with Chinese local offices fail to discover fraud early on. Many of these Chinese scammers use phony bank statements to defraud the auditors, the auditors don't usually check with the bank for original bank statements leaving the door open for fabricated paperwork, additionally, there have been many cases where bank employees work in collaboration with the Chinese scammers to provide false documents and "chop" which are the official seal of approval that Chinese banks use to identify and authenticate records. This is a very dangerous trend. What you cannot discount here is the level that these people have gone to perpertrate fraud. The estimated $36 billion lost in RTO (reverse take over) in the past few years cannot be chalked up to simple everyday bag snatching, this has been a huge crime that must be addressed.
As of today, the Chinese reverse mergers market has mostly seized up and may not fully recover simply because there is no investor interest in many cases. There are plenty of good companies still out there who need investment growth capital but the bad apples in the cart have really poisoned the credibility in this market. The math is pretty simple, you lie/cheat/steal + you do that over and over again + you lose credibility = Game Over. Additionally, it should be noted that it has not only been reverse mergers of Chinese companies that have been ethically challenged. There have been issues with Form S-1 IPOs (underwritten by investment bankers) from mainland China as well. At this point everyone is of course blaming everyone else, the Investment Bankers are blaming the auditors, the auditors are blaming the issuers, the issuers are blaming the Investment Bankers, the stock promoters and everyone else. Apparently, the word "due diligence" gets tossed around a lot..but nobody seems to understand what it really means. Everyone rests on the laurels of someone else's due dilligence..and so on.
The official line if there is one is for a Chinese company to work with a top auditor such as Deloitte or E&Y (Ernst & Young). While that may seem to provide some level of "feel good" comfort to big investors, at the end of the day, it doesn’t really do any good at all. Several of the biggest Chinese frauds had engaged big brand name audit firms such as the aforementioned as well as BDO and others.There needs to be some real culpability on the China-side and serious laws to prevent and punish those who are guilty of fraud such as mismanagement of funds, questionable fund transfers to dubious or related parties and creating phony financial statements.
China is a great nation that holds incredible value and potential..but for investors to feel confident in China, this systemic fraud among Chinese business must end or at the very least carry repercussions and those responsible must be brought to justice.
Disclaimer: ReverseMergersChina.com is NOT an investment advisor, broker/dealer, research firm, analysts, or short sellers, we do not hold any positions, long or short in any of the above mentioned stocks. This website is an advertising information website with links and articles to other websites, we do not produce news, we help aggregate it and distribute it in a nice friendly setting where you can't get mugged because we assume you're here because you've already been mugged. Anything you read on this website is NOT investment advice.