Kangmei Pharmaceutical Co., Ltd is a China-based company, principally engaged in the manufacture and sales of pharmaceutical products. The Company's principal products are Chinese medicines, including American ginseng, notoginseng powder, salvia powder, radix codonopsis pilosulae, maltiflower knotweed, angelica and lonicera flower, among others. The Company is also engaged in the trading of Chinese herbal medicines, medical equipment and healthcare products related businesses. It also engages in the provision of real estate leasing and distribution services, among others. The Company mainly conducts its businesses within domestic markets.

The Company listed on the Shanghai Stock Exchange (SSE) in March 2001 raising CNY226.26M in its IPO. Three further share offerings raised another CNY9.65B; Jul.2006: CNY0.50B, Sep.2007: CNY1.05B, Jun.2016: CNY8.10B.

December 16, 2012 A report co-authored by Beijing Zhongneng Xingye Investment Consulting and Capital Week was released. In the report they accused Kangmei of inflating its assets by at least 1.8 billion yuan ($293 million) which was almost equal to the company’s combined net profits from 2002 to 2010.

March 2013, Another report from Zhongneng was published which claimed that 760 million yuan worth of Kangmei’s intangible assets were in fact a 140 meter high barren hill.

June 2016, Cai Ming, former director of an office in charge of drug safety at the Guangdong Province Food and Drug Administration, was sentenced to eight years in prison for taking bribes from more than two dozen pharmaceutical companies. In exchange for bribes from pharmaceutical companies, Cai used his position—which included reviewing drug applications, issuing drug safety certificates, and supervising local pharmaceutical companies — to help those companies perform favours. Kangmei Pharmaceutical, bribed Cai a total of 300,000 yuan so that the company could continue “good relations” with him, reported the state-run news website China Internet Information Centre (china.com.cn) on June 1 2016. At the end of 2015, Kangmei once paid 100,000 yuan for the sole purpose of providing financial support to Cai’s son, who was going to study abroad in Australia.

December 2018 Kangmei was put under investigation by the China Securities Regulatory Commission (CSRC) on allegations that it had violated disclosure rules.

February 2019 The Company, on the verge of defaulting on almost $300 million of bonds, was able to retire the debt thanks to pressure from the local government on the company’s hospital customers. The Guangdong provincial government told all hospitals that owed money to Kangmei to pay up or else the hospitals’ heads would be held accountable.

April 30, 2019 When responding to enquiries by the Shanghai Stock Exchange, Kangmei said in a circular that multiple “accounting errors” had led to a $4.4 billion overstatement of its cash position in its 2017 financial statements.

May 17, 2019 China Securities Regulatory Commission announced that in its investigation of Kangmei Pharmaceutical it found that the Company had used fake bank deposit slips to inflate its cash reserves, forged documents for non-existent business activities, and transferred company funds to related parties to trade in its own stock.  Kangmei Pharmaceutical admitted it overstated its cash positions by 29.9 billion yuan using false documents and transaction records -- an amount one lawyer said was unprecedented in China.

June 5, 2019 GMT Research issued a report "FAKING CASH Coming to an A-share near you?". The report covered the fake cash flow fraud epidemic that had arrived in the Chinese A-share market. Kangmei was one of the companies covered in the report. In conclusion it noted that the financials pre-restatement had fraud-like traits such as super-normal profitability, a build-up of nonproduction assets (mainly cash) and a lack of dividends despite excess cash inflows. As a result, it triggered GMTs fake cash flow fraud and excess capital models. It said that Kangmei managed to access the debt markets which was unusual for a fraud, and likely extended its duration. The restatement so far showed that 50% of profits had been faked FY16 to FY17, with the evidence likely hidden in fake cash balances. GMT suspected further write-downs and restatements to come.

August 16, 2019 China Securities Regulatory Commission banned six people linked to the scandal. The financial reporting fraud at Kangmei Pharmaceutical Co was "premeditated, organized, long-term and systematic," the CSRC said in a statement released. Another 16 people would also be punished, the CSRC said.

February 3, 2020 Kangmei defaults on 2.4 billion yuan (US$340M) of bonds. Later that month, a majority of creditors accepted a debt workout proposal in which creditors holding no more than 500,000 yuan in face value would get full repayment. Those owning more would get paid in proportion to their positions.

May 15, 2020 CSRC fined Kangmei Pharmaceutical 600,000 Yuan and blacklisted six executives for their role in a $4.2 billion accounting scandal. The ban included Kangmei’s chairman at the time and five others, who won’t be allowed to participate in the securities market or take positions as executives or board members at any listed company for at least 10 years.

ecns.cn: China's muddy waters ? 18 Dec 2012
Market Watch: Can a China investment firm legally sell short ?, 13 May 2013
Caixin: Pharmaceutical Firm Avoids Default as Guangdong Pressures Customers, 15 Feb 2019
Bloomberg: A $4.4 Billion Accounting Error Burns Investors in China, 30 Apr 2019
Week In China: Disappearing cash, 17 May 2019
China Securities Regulatory Commission: Kangmei Pharmaceutical's investigation progress, 17 May 2019
Caixin: Drugmaker Kangmei Seeks Stock Trading Halt After Regulator Confirms It Faked Financial Data, 18 May 2019
GMT Research: FAKING CASH Coming to an A-share near you?, 5 Jun 2019
The HK Standard: Kangmei Pharma boss among six banned for US$4.5b fraud, 16 Aug 2019
SCMP: Why is Kangmei, found to have committed one of China’s biggest financial frauds, rallying?, 23 Aug 2019
Caixin: Chinese Drugmaker Kangmei Defaults on $340 Million of Bonds, 4 Feb 2020
Accounting Today: China blacklists six executives linked to $4.2B fraud, 15 May 2020
Bloomberg: China Blacklists Six Executives Linked to $4.2 Billion Fraud,15 May 2020