Bodisen Biotech (BBCZ US)

Listed in 2004 through a reverse merger, Bodisen Biotech claimed to manufacture and market a brand of “organic” fertilizer to several agricultural provinces in China. However, strictly speaking it wasn’t a biotech company and nor were its fertilizers organic under US and EU definitions.

The best source of information appears to be the Class Action brought against Bodisen, its advisor New York Global Group (NYGG), and its founder Benjamin Wey in November 2006. This suit alleges that NYGG appeared to be acting as an agent for Bodisen by issuing positive analyst reports. However, unbeknownst to investors these reports and other public statements were issued as a direct result of a paid consultancy agreement(s) the Company had with NYGG, and/or Wey. Thus, investors were misled to believe they were obtaining an independent investment opinion under the imprimatur of a disinterested financial institution. It also appeared that Wei might have had a significant financial interest in the shares of Bodisen, and that he had previously committed a number of securities violations.

Following a flurry of press articles in September 2006 questioning Bodisen, NWGG and, in particular, Wey, the American Stock Exchange issued a letter to Bodisen in November claiming that it was not in compliance with certain listing standards. Moves were made to delist the company prompting a share price collapse.

According to Bodisen’s 2006 financials, the company was highly profitable with a 31% operating margin and no debt, as shown in the following table. However, profits of US$14.6m in 2006 turned to losses of US$14.2m in 2007, on the back of a 72% decline in revenue and a bad debt provision of US$23.8m. In our view, this is evidence that the company was at least a partial fake cash flow fraud. Interestingly, within the Class Action suit it is mentioned that Timothy Halter, of Dallas-based Halter Financial, claimed to have turned down the Bodisen reverse merger after his “auditor ultimately deemed it un-auditable at the time”.

In September 2015, Wey was indicted by the United States Department of Justice on charges of securities fraud, stock manipulation, money laundering, and wire fraud for his role in an alleged fraudulent scheme to profit from undisclosed, controlling ownership interests in several companies in the United States, including 6D Global Technologies.

Capture

The Rosen Law Firm: The Rosen Law Firm Class Action Lawsuit against Bodisen Biotech, et al, Nov 2006

Yourman Alexander & Parekh LLP: Bodisen Biotech, Inc. Sued for Securities Fraud in Federal Court, 30 Nov 2006

Bodisen Biotech: Annual Report, 31 Dec 2006

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