Understanding China, One Blog at a Time

An American in China

Chinese Companies that Have Bilked the US Stockmarket

Posted by w_thames_the_d on December 28, 2010

Yesterday I posted about Chinese companies who have bilked US citizens out of their hard earned money. With the rise of China, more Chinese companies are being listed on the US exchanges…

China Energy Savings Technology: This company — the focus of yesterday’s SEC action — billed itself as a manufacturer of “energy savings products.” It agreed to sell $50 million in stock through a PIPE (private investment in a public equity) in January 2006 and soon registered to sell 10 million additional shares in a public offering.

A month later, the company disclosed that the SEC had opened an “informal” inquiry into its operations. Within weeks, many of the top people in the company resigned — directors, executives, all the key participants — and the company went dark in China, SEC records show.

In April 2009, the SEC obtained judgments finding four of the principals liable for fraud, on the basis that they had used a phony shareholder base and phony stock transactions to boost the price of stock that was essentially worthless, pocketing more than $25 million from American investors.

Bodisen Biotech [BBCZ


] : This maker of organic fertilizers saw its shares delisted from the American Stock Exchange in March 2007, partly based on alleged inaccuracies in its filings regarding the role of stock promoter Benjamin Wey, president of New York Global Group.

Shareholders filed lawsuits accusing Bodisen of securities fraud, but their complaints were dismissed. Wey has claimed that irresponsible short-sellers sent the company into a tailspin. The stock peaked at about $20 in 2006. Its OTC shares traded recently at about 50 cents. Bodisen did not respond to requests for comment.

Shanghai Medical Technology: This operator of dialysis clinics raised $12.5 million in a 2007 PIPE deal. The money never made it to the clinics — it was transferred instead to the personal account of one of the company’s directors, according to a source involved in the deal. The company appears to be defunct. Multiple attempts to reach company officials were unsuccessful.

Fuwei Films [FFHL


]: This manufacturer of industrial plastic films went public in 2006 through an IPO on Nasdaq. In 2009, the company disclosed that three executives had been convicted in China on charges that they had illegally taken control of the business there.

Shareholders alleged in a lawsuit that Chinese authorities were investigating the hijacking of the company while stock promoters in the U.S. hyped the new issue. The suit charged that company officials had provided false and misleading information relating to the company’s IPO.

China Yingxia [CYXI


] : This health-food company was founded by a nurse-turned-entrepreneur. It reached a market cap of more than $900 million and then in 2009 stopped filing statements to the SEC. Information remains scarce, but according to one person familiar with the company, the nurse is now in jail in China for selling unregistered securities to individuals there, a violation of the country’s securities laws. Attempts to reach the company were unsuccessful.

Asia Time [TYM


]: This watchmaker started trading on the American Stock Exchange at $8.50 a share in February 2008. Without warning, the company stopped filing SEC statements a year later, prompting the Amex to delist its stock. It occasionally trades on the Pink Sheets and last traded Nov. 26 for a penny. Attempts to reach the company were unsuccessful.

China Water & Drinks: This bottled-water company merged into a U.S.-listed shell in 2005. Two years later, it was acquired by a special-purpose acquisition company run by Richard Heckmann, a veteran U.S. investor based in Southern California.

Four months after the deal closed, Heckmann charged — a charge repeated in court papers — that the Chinese CEO had embezzled millions of dollars and that the company’s customer list was mostly fiction. The CEO has denied those charges and countered with a lawsuit claiming Heckmann owes him millions.

One Response to “Chinese Companies that Have Bilked the US Stockmarket”

  1. Richard Seeto said

    This is a horrible way to defraud the public, any public of its money by fruadulent means and it is to be abhorred. But hey! Are American companies innocent of such practices?
    Look into your own country before highlighting the faults of others!

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