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https://www.institutionalinvestor.com/article/b1mlyjys554sgd/They-d-Find-Fraud-Fraud-Fraud

'They'd Find Fraud, Fraud, Fraud.'

2020-07-23 18:42:38, , Institutional Investor

Content Categorization
/Business & Industrial

Word Count:
3595

Words/Sentence:
21

Reading Time:
23.97 min

Reading Quality:
Adept

Readability:
13th to 15th

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The story of Chinese fraud goes back a decade and a half, to the mid-2000s, when a wave of Chinese companies rolled onto U.S. exchanges via a backdoor maneuver known as "reverse mergers."

The SEC barred about 180 Chinese companies from U.S. trading and filed dozens of lawsuits against the companies, their executives, and "gatekeepers" like auditors and consultants who helped them get access to U.S markets.

Chinese companies would merge with a U.S. shell company and take over its public listing, gaining access to American exchanges, trading, and investors – all without the regulatory scrutiny a traditional initial public offering would have brought.

And in May, the U.S. Senate passed a bill aimed at tackling a key part of the problem: China's refusal to allow U.S. regulators to scrutinize the work of audit firms that vet the finances of many Chinese companies.

But starting around 2011, revelations spilled out about the accounting and disclosure of company after Chinese company – that they'd inflated their revenues, pretended they had businesses they didn't, or seen their coffers looted by executives.

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