ChinaCast Education Corporation provided e-learning services and content to K-12 schools, universities, government agencies and corporate enterprises in the People’s Republic of China.
In November 2011, Kerrisdale Capital released a report in which it accused the company of falsifying its financial statements, materially overstating revenue and profit. These findings were then passed onto the SEC.
The SEC alleges that ChinaCast Education Corporation’s former CEO and chairman of the board Chan Tze Ngon illicitly transferred $41 million out of the $43.8 million raised from investors to a purported subsidiary in which he secretly held a controlling 50 percent ownership stake. From there, Chan transferred investor funds to another entity outside ChinaCast’s control. Chan also secretly pledged $30.4 million of ChinaCast’s cash deposits to secure the debts of entities unrelated to ChinaCast. None of the transactions were disclosed in the periodic and other reports signed by Chan and filed with the SEC.
Kerrisdale Capital: ChinaCast Education, 11 Nov 2011
SEC: Press Release , 26 Sep 2013
SEC: Annual Report , 31 Dec 2010