Hall of Shame

China Medical Technologies (CMEDQ US)

China Medical was listed in August 2005, raising US$96m. The company was targeted by short sellers in December 2011, with its shares plunging after a report from Glaucus Research Group alleging that the medical device-maker defrauded investors. The Glaucus report said the company overpaid for an acquisition to help the company’s chairman embezzle funds and selling its core business to hide that China’s regulator had suspended or was close to ending an important permit. Its American depositary receipts were delisted from the Nasdaq in March 2012. Three months later, debtholders of China Medical asked for the company to be liquidated after it missed interest payments and the US SEC suspended trading of the ADRs, citing questions on the accuracy of information it provided in statements and filings. Its official liquidator said in a bankruptcy filing that the company’s financial troubles probably resulted from alleged “fraudulent transfers” of assets, and that much of its money was missing.

Finally, in March 2017, the founder and a former executive of China Medical Technologies Inc. were charged in the US with stealing more than US$400 million from investors. Xiaodong Wu was CEO and former CFO Tak Yung Samson Tsang, 46, allegedly lied about how they would spend the proceeds of note offerings from January 2005 to November 2012, saying they would be used for general corporate purposes, to buy businesses and technologies and to repurchase outstanding notes, prosecutors said. Instead the two men apparently diverted more than US$400m to entities controlled by or related to them. Wu and Tsang also allegedly forced China Medical’s independent director and outside auditor to resign, halted public disclosures of material events affecting its securities and ceased making interest payments.

Glaucus Research: China Medical Technologies, 12 Feb 2011

Bloomberg: China Medical Technologies Executives Charged in U.S. Fraud Case, 21 Mar 2017

Quartz: Around $400 million is allegedly missing from a Chinese company, 4 Dec 2012

China Medical Technologies: Annual Report Mar 2011