Quick Take – Have Chinese fraudsters gone phishing? (CHBT)

After the close of trading on the 23rd of June, China-Biotics (CHBT) issued an 8k, available here, which announced the resignation of CFO Travis Cai as well auditors BDO. Attached to this 8k is a startling series of letters from BDO to the company and its Audit Committee. The letters describe, quite vividly, the amazing lengths to which CHBT has gone in perpetrating a fraud, that while not as large as Tree-X, is certainly the most brazen. Read more about China-Biotics, here, at Citron Research.

The letters contain several examples of what is sadly commonplace fraud in Chinese companies. There are cash balances that don’t square with the interest earned on the income statement, the forged “chops” on sales agreements, and completely forged bank statements (“advices”) . It is now common knowledge that Chinese companies often place stooges at local banks to intercept audit firm employees and investigators, and smart auditors have taken to inspecting supporting documents at bank head offices. What is new about this 8k is the revelation that in the case of CHBT the auditors were given a username, password and web address for a bank’s website. A website that was, itself, a complete forgery. This takes the whole fake bank website phishing scam to a whole new level.

Imagine the delicious irony if the fake bank web site was run on Longtop Financial (LFT) software, or built by Longtop employees?

The content contained in this blog represents only the opinions of the author. The author may hold either long or short positions in securities of various companies discussed in the blog. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. This blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s