by Brian Mahany
At least 10% of Chinese companies that have gone public on U.S. stock exchanges are fraudulent. That is a bold statement and one made on OffshoreAlert.com, a leading website that tracks international fraud. Do I believe that statistic? Personally, I think it’s low.
Investors have been clamoring in recent years to grab a piece of the rapid growth in China’s economy. While there are many great companies with strong fundamentals, China’s rapid economic expansion has attracted its fair share of fraudsters.
Most of the recent Chinese companies that have become publicly traded in the U.S. have done so through a device known as the reverse merger. A Chinese company merges with a dead or dying public U.S. company. In just a few months the Chinese company can become traded on U.S. markets. That opens the door to both much-needed capital for some companies and heartache for investors in others.
These companies, although listed in the United States, have their assets in China. Often their financials are audited by questionable or unknown auditors and have affiliated holding companies in other offshore jurisdictions. The resulting mess makes it virtually impossible to regulate and police them. Do they really own the assets they claim? Are there books accurate? It’s hard to tell.
Many of these companies also have associations with very shady financiers. These same financiers frequently have a long list of regulatory violations and sometimes criminal prosecutions.
Suing one of these firms is equally difficult although there may be some relief if you purchased your investment upon the advice of a stockbroker or investment advisor. Those folks have a duty to perform due diligence on the products and companies they recommend.
If you lost money in one of these scams, contact a lawyer that concentrates in FINRA arbitrations and investment fraud recovery.
Mahany & Ertl is a full service boutique law firm concentrating in fraud recovery and securities fraud. We help people recover their hard earned money. Our services can often be performed on a contingent fee basis meaning you don’t pay unless we collect. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct).
Mahany & Ertl, LLC – Milwaukee, Wisconsin: Detroit, Michigan & Portland, Maine. Services performed nationwide.