🧵 A landmark civil court case in Chinese A share securities fraud just had a significant verdict ($385 million). The significance is not just in dollars.
Kangmei Pharm. (600518) accounting fraud 2016-1018, officially uncovered in 2019, unofficially by social media 2018. /1
Kangmei Pharm. (600518) accounting fraud 2016-1018, officially uncovered in 2019, unofficially by social media 2018. /1
It's first time, China Securities Investor Services Center (ISC) filed as plaintiff in representative of investors.
ISC, a non-profit financial institution and is under the direct administration of the China Securities Regulatory Commission (CSRC).
isc.com.cn/html/zxjs/
/2
ISC, a non-profit financial institution and is under the direct administration of the China Securities Regulatory Commission (CSRC).
isc.com.cn/html/zxjs/
/2
Notice the murky status of non-profits. Its website ends with .com.cn, which for English readers may thought as for-profit companies.
China skeptics are right to be skeptical as ISC directly administered by CSRC (China's SEC), a govt entity.
On the ground China is complex /3
China skeptics are right to be skeptical as ISC directly administered by CSRC (China's SEC), a govt entity.
On the ground China is complex /3
First time:
5 board members liable: in founder-centered companies, they can't be rubber stamps with no consequences.
They are liable for 35% of the verdict ($132mil)
Rest on the founders and its accounting firm, the person who signed off the annual report. /4
5 board members liable: in founder-centered companies, they can't be rubber stamps with no consequences.
They are liable for 35% of the verdict ($132mil)
Rest on the founders and its accounting firm, the person who signed off the annual report. /4
A very interesting anecdote of this case is that original questioning of Kangmei annual report came from Chinese social media, on 2018 Oct 15th, with a series of wechat subscription articles questioning its numbers.
2018 Dec 29, official CSRC notice of investigation
/5
2018 Dec 29, official CSRC notice of investigation
/5
The other compare and contrast with Luckin Coffee case is fraud was uncovered with longer lag (3yrs) vs Luckin Coffee (1yr).
Politics aside, remains to be seen whether US exchanges delisting law actually helps US investors more, w. US listing~=higher accounting standards /6
Politics aside, remains to be seen whether US exchanges delisting law actually helps US investors more, w. US listing~=higher accounting standards /6
Anyone interested in reading the original 44-page verdict in Chinese, here is the link and case number.
No doubt Internet and social media has helped fraud uncovering and govt disclosure in this case, which would be unthinkable 30 years ago. /7
pdf.dfcfw.com/pdf/H2_AN20211…
No doubt Internet and social media has helped fraud uncovering and govt disclosure in this case, which would be unthinkable 30 years ago. /7
pdf.dfcfw.com/pdf/H2_AN20211…
For the same subject, @Wikipedia's English page almost always has better information than its Chinese page.
Wonder why it couldn't simply translate, or lack of readership for its Chinese page means less resource.
en.wikipedia.org/wiki/Kangmei_P…
zh.wikipedia.org/wiki/%E5%BA%B7…
Wonder why it couldn't simply translate, or lack of readership for its Chinese page means less resource.
en.wikipedia.org/wiki/Kangmei_P…
zh.wikipedia.org/wiki/%E5%BA%B7…
Kangmei case a verdict, not settlement. Defense could still appeal. Whether the money will be there to pay still need to work out.
The FIRST ever personal bankruptcy case in China happened 4 days ago, another landmark.
Justice and Liberty meaningless slogans without details.
The FIRST ever personal bankruptcy case in China happened 4 days ago, another landmark.
Justice and Liberty meaningless slogans without details.
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