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Saturday, November 16, 2013

China Stock Fraud - Unknown Transactions!!


Understand Chinese Stock Frauds

(Use Others Bad Experiences to Protect yourself and family from the Chinese Stock Scam and Financial Terror!!)

Updated December 13, 2014

Anyone investing in Chinese companies listed in North America &  Europe is taking a big risk. Recent events have shown that the management of many of these Chinese companies are fraudsters with primary intention of duping the investors.
The Chinese CEOs and Insiders usually execute their scams by:
  • Under-reporting bank loan balances,
  • Creating non-existent or fictitious shell companies as customers with no verifiable revenue,
  • Creating fictitious shell companies as Suppliers with no verifiable revenue, 
  • Under-reporting insider transactions and money transfers,
  • Indulges in insider trading that is never disclosed,
  • Indulges in pump and dump schemes,
  • Stealing company's assets by transferring it to insiders leaving the shareholders with empty shell company owning no asset,
  • Forging employee numbers,
  • Making fictitious buyout offers,
  • Uses the companies cash to secure the debt of companies privately owned by insiders,
  • Posting fake cash and fake revenue in their financial statements, and
  • Collaborating with local bank officials in China to inflate profit margins.
  • Collaborating with some dubious USA based brokers and Underwriters who driven by huge commissions fees and payouts finance the listing of these Chinese Scams without doing any serious due diligence or simply turned a blind eye to all the red flags.
  • Collaborating with some dubious USA based and Certified Public Accountants who as the Public Auditors of these Chinese Companies intentionally aid them gain access to the USA listing. Auditors must examine, on a test basis, whether a company they audit (the "Audited Company") genuinely sold goods, purchased supplies, received cash, paid out cash, or had cash on hand. (Generally Accepted Auditing Standard ("GAAS") No. 3.). Sometimes, the USA Based Auditors does not act independently of these Chinese companies and actually do not rigorously verify all these things and in most cases forge audit documentations for these Chinese firms by creating the financial statements for them. The USA Public Company Accountants Oversea Board has a list of these dubious auditors here:
These Chinese criminals have resulted in more than $100 Billion in damages to investors in North America. The list of many of these Chinese frauds are endless. These fraudsters at the end of their fraud usually disappear  in thin air by going dark, their stock is delisted and no one ever finds them again.

The USA SEC has been unable to deter these criminals so at the end of the day, it is the innocent victims that pays the price. In fact, these criminals understands how lousy, soft-to-criminals, ineffective and outdated the USA Securities Laws are in deterring them that they capitalize on it to defraud investors over and over again.  The USA SEC Laws were written in 19933 and 1934. Both laws are outdated and old and must be revised to reflect the challenges of the Internet Age.

Till date, the worst that can happen to them is to settle with the SEC and Class Action Lawyer for pennies to a dollar leaving damaged investors victimized for life. With the SEC's "Neither Admit Nor Deny" policy, these criminals basically walk away from the crime with their loots intact leaving the victims in limbo. When you actually read and understands the USA SEC Laws, you would be amazed that the law actually protects these violators by placing a cap on the amount of claims one can file against securities law violators. No matter the pain caused by these criminal psychopaths, the USA SEC Law caps the amount payable by these violators. There is no real deterrence in this law. Just settle and walk away and you would not be prosecuted. To add to the insult on victims, when the Case enters the USA Legal system, it takes years to move the Case forward to Jury. The whole system from Securities Law to Legal System seems to play on the side of these Criminals while the victims suffer in pains. The Criminals understands all these loopholes and capitalizes on it to defraud more and more people in the USA Stock Market.

In a compelling interview published by ABC News on January 10, 2013, the outgoing SEC Chairman Mary Schapiro discussed the Chinese Fraud menace on the USA stock exchange and the challenges the SEC has been facing on prosecuting the criminals. The SEC Chairman was blunt to say that  China refuses to help the SEC stop these investment scams. For the interview, click:

The Chinese FRAUD is the PLAGUE that has been Unleashed on Investors all across the globe and the best way to avoid it is by exposing it as much as possible.  
What is so mind boggling & incredible is that the USA SEC knowing fully well how difficult it is to audit Chinese companies and prosecute these criminal CEOs and insiders, and the high risk of fraud pervasive in Chinese Companies still allows them access to the USA market. A lot of these Chinese companies are still trading in NYSE  and NASDAQ and many more wants to list. The SEC cannot claim ignorance of this Chinese Fraud Menace and as such should put in place stringent measures to stop the scam or STOP the Chinese from listing in USA market!!
Some recommended measures that can be implemented by the USA SEC includes:
  • Update the outdated SEC Laws of 1933 and 1934 to reflect the challenges of the Internet Age. Both laws were written in an era where transactions were done through face-to-face human interactions and not through the internet.
  • Get the USA Government to see the Chinese Stock Fraud as a National Security Threat so that adequate resources of the USA Government can be deployed to stop or curtail it.
  • Sanction China if it continues to be non-cooperative in helping the SEC investigate and extradite these Chinese criminals to USA.
  • Require stock exchanges to HALT the stock of any Chinese Company whereby the Insiders or CEO had presented a Buy Out Offer to Shareholders. Such HALT would be lifted only when the suspicious Chinese Company must have provided sufficient Bank Guarantee to prove the credibility of the offer.
  • It is very clear that the Auditors are not sophisticated enough to tackle this fraud. The dynamic nature of the fraud and the ability of the Chinese Criminals to collaborate with local bank officials in China makes it very difficult for the Auditors to uncover these frauds. As such, there is urgent need to create an additional requirement for an independent Forensic Fraud Detection & Investigation Opinion in the quarterly financial statements of on all Chinese companies. This type of Forensic Detective Investigation work would be completed by Organizations that understands Chinese Financial Crimes and not just Auditors who are not properly trained in this area.
  • Require Chinese CEOs and Insiders to physically host their Annual Shareholders Meeting in the USA and also attend all such meetings.
  • Require Chinese companies to publish the photos of their CEO and Directors on their company websites. At least when they disappear, the photos would help the Bounty Hunters looking for them. If you are a honest CEO, you would not have concerns with putting your face on your company. It only becomes a concern when the CEO knows that it is a fraud bubble that would burst one day.
  • Setup a joint investigative Task Force among SEC and Chinese officials to pursue these fraudsters when they disappear in China.

How Not to Be a Victim of China Stock Fraud

The best way of avoiding being victim of China stock fraud is to basically not invest in any Chinese companies listed in North America. This is the best solution!!! Avoid them like hell because when the bubble burst, there is no one to help you. The Stock Exchange would disappear. The SEC would be helpless!!! You would basically be left alone with Class Action Lawyers collecting the remaining insurance claims. It is insane and must be avoided like a plague!!!

List of Recent Chinese Scams

The following information obtained from several public sources in the internet shows the depth of the Chinese scam and menace (source:

List of Chinese Stock Scams or Frauds or Companies Facing or Faced Securities Litigation in Singapore

This list includes name of company, stock symbol, and place of incorporation.
Beauty China Holdings Limited (SGX:B15) (Cayman Islands)
Celestial NutriFoods Limited (SGX:C56) (Bermuda)
China Aviation Oil (SGX: C47) (Singapore)
China EnerSave (SGX: 531) (Singapore)
China Fibretech Ltd. (SGX: F6D) (Bermuda)
China Hongxing Sports Limited (SGX: BR9) (Bermuda)
China Milk Products Group Limited (SGX:G86) (Cayman Islands)
China Printing & Dyeing Holding Limited (SGX: M67) (Singapore)
China Sports International Limited (SGX: FQ8) (Bermuda)
China Sun Bio-Chem (SGX: C86) (Cayman Islands)
China XLX (SGX: B9R) (Singapore)
China Zaino International Ltd. (SGX: FP1) (Bermuda)
Falmac Limited (SGX:559) (Singapore)
FerroChina Ltd. (SGX: F33) (Bermuda)
Fibrechem Technologies Limited (SGX: F12) (Bermuda)
Hongwei Technologies Limited (SGX:H80) (Bermuda)
KXD Digital Entertainment Limited (SGX:K07) (Singapore)
New Lakeside Holdings Limited (SGX:5EG) (Singapore)
Oriental Century (SGX: 5II) (Singapore)
Sino Techfibre (SGX: AD8) (Bermuda)
Sino-Environment Technology Group Ltd. (SGX: Y62) (Singapore)
Zhongguo Jilong Limited (SGX: Z03) (Singapore)
Zhonghui Holdings Ltd. (SGX: Z04) (Singapore)

List of Chinese Stock Scams or Frauds or Companies Facing or Faced Securities Litigation in Hong Kong

This list includes name of company, stock symbol, and place of incorporation. 
A - S China Plumbing Products Ltd. (SEHK: 8262) (Cayman Islands)
ABC Communications (Holdings) Ltd. (SEHK: 30) (Bermuda)
Asia Aluminum (SEHK: 930) (Bermuda)
Automated Systems Holdings Ltd. (SEHK: 771) (Bermuda)
Bep International (SEHK: 2326) (Bermuda)
CIL Holdings Ltd. (SEHK: 479) (Bermuda)
China Information Technology Development Ltd. (SEHK: 8178) (Cayman Islands)
China Jin Hui Mining Corporation Ltd. (SEHK: 462) (Cayman Islands)
China Medical and Bio Science Ltd. (SEHK: 8120) (Cayman Islands)
China Nickel Resources Holdings Co. Ltd. (SEHK: 2889) (Cayman Islands)
China Packaging Group Co. Ltd. (SEHK: 572) (Cayman Islands)
China Post E-Commerce (Holdings) Ltd. (SEHK: 8041) (Cayman Islands)
China Star Film Group Ltd. (SEHK: 8172) (Bermuda)
China Trends Holdings Ltd. (SEHK: 8171) (Cayman Islands)
Climax International Co. Ltd. (SEHK: 439) (Bermuda)
EganaGoldpfeil (Holdings) Ltd. (SEHK: 48) (Cayman Islands)
Extrawell Pharmaceutical Holdings Ltd. (SEHK: 858) (Bermuda)
First Natural Foods (SEHK: 1076) (Bermuda)
Fu Ji Food and Catering (SEHK: 1175) (Cayman Islands)
Grand Field Group Holdings Ltd. (SEHK: 115) (Bermuda)
Hong Kong Resources Holdings Co. Ltd. (SEHK: 2882) (Bermuda)
Info Communication Holdings Ltd. (SEHK: 8082) (Cayman Islands)
Jackin International Holdings Ltd. (SEHK: 630) (Bermuda)
Kith Holdings Ltd. (SEHK: 1201) (Bermuda)
M Dream Inworld Ltd. (SEHK: 8100) (Cayman Islands)
Mitsumaru East Kit (Holdings) Ltd. (SEHK: 2358) (Cayman Islands)
Nam Fong International Holdings Ltd. (SEHK: 1176) (Bermuda)
Nam Hing Holdings Ltd. (SEHK: 986) (Bermuda)
New City (China) Development Ltd. (SEHK: 456) (Cayman Islands)
Ngai Lik Industrial Holdings Ltd. (SEHK: 332) (Bermuda)
Ocean Grand Holdings Ltd. (SEHK: 1220) (Bermuda)
Pan Asia Mining Ltd. (SEHK: 8173) (Cayman Islands)
Pan Sino International Holding Ltd. (SEHK: 502) (Cayman Islands)
Peace Mark (SEHK: 304) (Bermuda)
Peaktop International Holdings Ltd. (SEHK: 925) (Bermuda)
Prosten Technology Holdings Ltd. (SEHK: 8026) (Cayman Islands)
QPL International Holdings Ltd. (SEHK: 243) (Bermuda)
Rojam Entertainment Holdings Ltd. (SEHK: 8075) (Cayman Islands)
SMI Publishing Group Ltd. (SEHK: 8010) (Cayman Islands)
Smart Union (SEHK: 2700) (Cayman Islands)
Tack Fat (SEHK: 928) (Cayman Islands)
U-right International (SEHK: 627) (Bermuda)
Wai Chun Group Holdings Ltd. (SEHK: 1013) (Bermuda)
Warderly International Holdings Ltd. (SEHK: 607) (Cayman Islands)

List of Chinese Stock Scams or Frauds or Companies Facing or Faced Securities Litigation in the United States and Canada

This list includes name of company, stock symbol, and place of incorporation.
A-Power Energy (APWR) (British Virgin Islands)
Advanced Battery Technology (ABAT) (Delaware)
Agfeed Industries (FEED) (Nevada)
American Oriental Bioengineering (AOBI) (Colorado)
AutoChina International (AUTCF) (Cayman Islands)
China Agritech (CAGC) (Delaware)
China Century Dragon Media (CCDM) (Delaware)
China Direct Industries (CDII) (Florida)
China Education Alliance (CEAI) (North Carolina)
China Electric Motors (CELM) (Delaware)
China Energy Savings Technology (CESV) (Nevada)
China Infrastructure Investment (CIIC) (Nevada)
China Integrated Energy (CBEH) (Delaware)
China Intelligent Lighting (CILE) (Delaware)
China MediaExpress (CCME) (Delaware)
China Medicine Corporation (CHME)
China Natural Gas (CHNG) (Delaware)
China North East Petroleum (CNEP) (Nevada)
China Nutrifruit (CNGL) (Nevada)
China Ritar Power (CRTP) (Utah)
China Shenghuo Pharmaceutical (CKUN) (Delaware)
China Sky One Medical (CSKI) (Nevada)
China Valves Technology (CVVT) (Nevada)
China Water & Drinks (HEK) (Nevada)
China-Biotics (CHBT) (Delaware)
ChinaCast Education (CAST) (Delaware)
Deer Consumer Products (DEER) (Nevada)
Duoyuan Global Water (DGWIY) (British Virgin Islands)
Duoyuan Printing (DYNP) (Wyoming)
Fuqi International (FUQI) (Delaware)
HQ Sustainable Maritime (HQSM) (Delaware)
Jiangbo Pharmaceuticals (JGBO) (Florida)
Keyuan Petrochemicals (KEYP) (Nevada)
L&L Energy, Inc. (LLEN) (Delaware)
Lihua International, Inc. (LIWA) (Delaware)
Longtop Financial (LGFTY) (Cayman Islands)
Longwei Petroleum Investment Holding Limited (LPIH)
NIVS IntelliMedia Technology (NIVS) (Delaware)
Orient Paper (ONP) (Nevada)
Orsus Xelent Technologies (ORSX) (Delaware)
Puda Coal (PUDA) (Delaware)
Qiao Xing Mobile Communication (QXMCF) (British Virgin Islands)
Qiao Xing Universal Resources (XINGF) (British Virgin Islands)
RINO International (RINO) (Nevada)
Sino Clean Energy (SCEI) (Nevada)
Sino-Forest Corp. (TSX: TRE) (Ontario)
SinoTech Energy (CTESY) (Cayman Islands)
SinoHub Inc. (SIHI) (Delaware)
Subaye (SBAY) (California)
Tibet Pharmaceutical Inc. (TBET) (British Virgin Island)
Universal Travel Group (UTRA) (Nevada)
Wonder Auto Technology (WATG) (Nevada)
Wuhan General Group (WUHN) (Nevada)
Yuhe International (YUII) (Nevada)
ZST Digital Networks (ZSTN) (Delaware)
Akai Holdings & Grande Holdings
Euro-Asia Agricultural Holdings & Yang Bin
Shanghai Land Holdings & Zhou Zhengyi

List of Chinese Stocks on the Watchlist based on Recent Exchange HALT in the United States, Canada and Hong Kong

Ambow Education Holding Ltd. (AMBO)  (Halted in USA)
FAB Universal Corporation (FU) (Halted in USA)
Hanfeng Evergreen Inc (HF) (Halted and delisted in Canada)
L&L Energy, Inc (LLEN) (Halted in USA)
Lihua International Inc (LIWA) (Halted in USA)
Tri-Tech Holding, Inc.(TRIT) (Halted in USA)
China Wind Power International Corp. (CNW) (Halted and Delisted in Canada)
China Ceramics  (CCCL) (Halted in USA)
China GengSheng Minerals, Inc. (CHGS) (Halted in USA)
Asia Packaging Group Inc. (Halted and Delisted in Canada)
Zungui Haixi Corporation (ZUN) (Halted & Delisted in Canada)

List of Chinese Stocks on the Watchlist based on Recent Publications by Forensic Investigative Research Firms like Carson Block's Muddy Waters Research

NQ Mobile Inc. (Listed in USA: NYSE: NQ)

Extra ReadingRead my other detailed blog on ongoing Civil Lawsuit on another Potential China IPO Fraud at: