Chinese Scams

Another Court Decision Against Fuqi (FUQI)

Ready for some reading? In a 45 page option, Sam Glasscock of the Delaware Chancery Court slams Chinese reverse-merger scam Fuqi International (FUQI) and its Board of Directors. Some choice tidbits:

Plaintiff has pled facts with particularity that show that the Fuqi board has abdicated its responsibilities because the investigation has been left in limbo, with no progress, for several months. Under that view of the facts, Fuqi management is not entitled to the business judgment rule’s protections. Beyond that, Fuqi management has refused to pay for the professional  advisors—including auditors and legal counsel—of the Audit Committee performing the investigation. This lack of payment has thwarted what efforts could have been taken by the Audit Committee to investigate. To make matters worse, the independent directors, who could have conducted a meaningful investigation on behalf of the company, have resigned from their posts. Thus, the Plaintiff has alleged with particularity that the board has not only failed to move the investigation forward, but has also impeded that investigation. Nor does the record indicate that the investigation continues. It has been abandoned.

And yet the SEC still lets it trade.

Read the full decision here.

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.
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What makes Fuqi so darn special? (FUQI)

Day after day FUQI shares trade, without the SEC doing a thing to protect investors from this long-running, obvious, Chinese con. Recall that FUQI has not filed a 10K since its 2008 report.

Yet the regulators are not always so reticent to act. In fact, the SEC has suspended trading in 13 companies since the beginning of 2013 due to “lack of current and accurate information.”

For example, on the first of March, the SEC halted trading in Southern USA Resources (SUSA):

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Notes from the Kerr/Quiel Trial – (SEFE, VOC)

The court documents for the tax fraud trial of SEFE ringleaders Stephen Kerr and Michael Quiel, are becoming available. One, available here, indicates that Kerr and Quiel dealt with Adam Benowitz’s (here’s a pic) Vision Opportunity Capital Partners vehicle.

Vision is well known for its pumping of Chinese reverse merger junk, as well as for stuffing their listed vehicle, Vision Opportunity China Fund Ltd. (VOC on the AIM exchange, the UK’s answer to the Pink Sheets, now in liquidation) full of dreadful Chinese names. And known for being the subject of various probes. But who knew Adam and partner Randy Cohen, were also involved with the likes of Kerr and Quiel? Or K and Q with them? Small world indeed.

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.

A Little More on Fuqi (FUQI)

As expected, FUQI is still unable to file a 10K. In an NT10K filing last night, available here, they admit that not only can the company not produce the required documents by the normal deadline, they already know they will miss the 15 day extension period:

the Registrant is unable to timely file its Annual Report on Form 10- K for the year ended December 31 , 201 2 .   The Registrant will file its Annual Report on Form 10- K for the year ended December 31 , 201 2 as soon as it is able; however, the Registrant is not able to provide a reasonable estimate as to such filing at this time, which will not occur within the fifteenth calendar day after the prescribed due date for such report.

There is also a fascinating lawsuit in California between a FUQI stuckholder, Michael Patrick Kelly, and a former FUQI director and head of its Audit Committee, Victor Hollander.

Hollander, a US resident, is likely the only person affiliated with FUQI that can be properly served. Victor might want to make sure FUQI has been keeping up its D&O insurance. Here is an excerpt from the latest court filings:

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The Strange Case of Fuqi Intl (FUQI)

Back in October 2007, when the mania for all things speculative fraudulent and Chinese was at its peak, the investment banking powerhouses of Merriman Curhan, and Ford, along with (now jailed) Obama and Clinton fundraiser Hassan Nemazee’s Brean Murray, Carret & Co., brought an obscure Chinese jewelry company public. That company, Fuqi International (FUQI) unlike many disgraced Chinese stocks, still trades today.

Perhaps even more astounding is that the shares of Fuqi have risen from 61c at the start of the year, to around $1.50 earlier this week.

The question is why? FUQI has not filed a 10K for 2009, nor have they filed a 10K for 2010, nor 2011, nor (as of yet) 2012. Investors have no accurate public information. Well, almost none. Although the company cannot provide a set of reliable accounts, they did manage to disclose one small little item….

FUQI has received a nastygram from the SEC. According to an 8k filing on January 10th of this year:

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Quick Take – Will Morgan Stanley Wake Up? (YONG)

From a press release dated May 31, 2011:

After extensive due diligence, we believe Yongye to be an exceptional company that has built significant brand recognition in China’s agriculture industry through its integrated marketing campaigns, distribution strategy and the benefits its Shengmingsu-branded products have brought to Chinese farmers,” stated Mr. Homer Sun, Managing Director of MSPE Asia.  “The Company’s core products address an important need for farmers to enhance yield for crops planted on soil that has become degraded by decades of over-fertilization.  In addition to product efficacy, we are impressed by the Company’s strategy and execution to develop an effective sales network directed at an underpenetrated segment of Chinese demand.  We look forward to being long-term shareholders and partners with Yongye and intend to provide our full support to Yongye with respect to operating strategies and the capital markets.”

In connection with this transaction, Mr. Sun is joining the Company’s board of directors.

From March 18, 2013:

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Peter Siris in the Mist (CCME, YUII, PUDA, etc)

China reverse merger apologist, fund manager, and NY Daily News columnist Peter Siris (remember him?) is finally no longer a stain upon the US markets. Early this morning the SEC issued an Initial Decision (read it here) banishing him from the securities industry.

IT IS ORDERED that, pursuant to Section 15(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78o(b), and Section 203(f) of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-3(f), PETER SIRIS IS BARRED from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in an offering of penny stock.

Any chance he’ll autograph our office copy of his book, Guerilla Investing: Winning Strategies for Beating the Wall Street Professionals, available for $0.01 at Amazon?

UPDATE: Just ordered an office copy of his OTHER book, The Peking Mandate. Also available for $0.01 at Amazon.