The SEC filed a civil complaint on Friday, 18 October, against Yuhe International, Inc.(YUII, formerly NASDAQ, and now OTC), and its CEO, Gao Zhentao, alleging fraud. See SEC Litigation Release number 22848; see also Case 13-CV-01598, United States District Court for the District of Columbia.
Judging from the complaint, the allegations involve essentially a conversion of trust wherein the CEO diverted proceeds from a public offering to his personal use, and ostensibly admitted this in a conference call with investors.
Also interesting in this case-the transaction was initially disclosed when "In June 2011, a research company published a report on an investing website that claimed the Dajiang Acquisition never occurred.".
I haven't determined yet just who the "research company" was.
Certainly seems like fowl play to me.
Just out of curiosity, when did they release this? If it was this week, the Chinese markets didn't get much of a pop out of it; Shanghai and Shenzhen actually closed down a bit as compared with last week.
"They attract investors by claiming that the investors will earn exponential, risk-free returns with little or no effort. Defendants claim that investors can earn money when 'Profit Reward Points' (Prpts) they are granted at the time of their initial investments increase in value or pay dividends, and can earn even larger returns by converting their Prpts into shares of CKB168 stock when the company conducts a promised IPO on the Hong Kong stock exchange. Investors have also been told that they will be able to make even greater returns in the forms of commissions and bonuses by recruiting new investors. CKB promoters have raised more than $20 million from U.S. investors, and millions of dollars more from investors in Canada, Taiwan, Hong Kong, and other countries in Asia."
"The individual defendants are three foreign nationals; Rayla Melchor Santos, Hung Wai (Howard) Shern, and Rui Ling (Florence) Leung (aka Kwai Chee Leung), who control the CKB entities, and eight 'senior promoters' in the United States; Daliang (David) Guo, Yao Lin, Chih Hsuan (Kiki) Lin, Wen Chen Hwang (aka Wendy Lee), Toni Tong Chen, Cheongwha (Heywood) Chang, Joan Congyi (JC) Ma, and Heidi Mao Liu (aka Heidi Mao.)"
From SEC Litigation release No. 22846, issued yesterday afternoon:
Securities and Exchange Commission v. CKB168 Holdings Ltd., et al, et al., Civil Action No. 13-5584 (E.D.N.Y., filed October 9, 2013)
SEC Halts $20 Million Pyramid Scheme Targeting Asian-American Community
"The Securities and Exchange Commission today announced charges and asset freezes against the operators and promoters of a worldwide pyramid scheme targeting members of the Asian-American community. The perpetrators of the scheme falsely promised exponential, risk-free returns to investors in a venture that purportedly sold Internet-based children's educational courses.
The SEC's complaint, filed under seal on October 9, 2013 and unsealed October 16, 2013 in the Eastern District of New York, alleges that since mid-2011, the defendants have solicited investments in an entity operating under the business name "CKB" or "CKB168," which they claim is a rapidly growing and legitimate multi-level marketing company that purportedly sells web-based children's educational courses. Defendants solicit investors through a variety of tactics, including in-person sales pitches, videotaped presentations posted on the Internet, websites, written brochures, and email and telephone communications." (--cont'd--)
"More and more Chinese stocks have high percentage gain recently."
Chinese stocks in general have fared reasonably well this year. A particular index I track, the BNY Mellon China Select ADR index (^BKTCN on Yahoo!(, is up 22.969% since the first of the year, as of closing today. By contrast, as of Friday's close, the Hong Kong, Shanghai, and Shenzhen markets were all negative YTD.
This, of course, should dispel any notion that here is an endemic anti-Chinese bias in the U.S. markets; Chinese equities are faring better here than at home.
Yes, I understand the "locate" provision of the rule, yet this is precisely the provision that Knight has been cited for violating. This would seemingly be the easiest of the three tests to satisfy, so the fact that the SEC has cited a violation here suggests to me that they are imposing a more stringent requirement than merely asserting that Broker A has represented that shares are available to borrow.
We might see some better definition here if Knight decides to appeal any portion of this. Speculatively, I suspect that the SEC may hold that "Broker A" in your example needs to obtain an affirmative and specific verification from "Broker B" that shares are available. This would still be less cumbersome than having the shares in hand, or having an executed lending agreement, but would require more effort than simply taking a look at IB's website to see whether they list shares available to borrow, for example.
In any case, and again in the context of HFT, this transaction would necessarily need to be managed by (and manageable by) the automated system. Ultimately, I think the solution would need to be a centralized database of shares available for loan (possibly managed by the DTCC). "Reservations" of shares for short sales could be deducted in real time, and assigned a lot number, to meet the documentation requirement.
In the context of the Knight Capital matter, of course, the issue is reconciling this with high-frequency trading. Here's the operative rule as quoted in the Order:
"...Rule 203(b) of Regulation SHO prohibits a broker or dealer from accepting a short sale order in an equity security from another person, or effecting a short sale in an equity security for its own account, unless it has borrowed the security, entered into a bona-fide arrangement to borrow the security, or has reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due (known as the 'locate' requirement), and has documented compliance with this requirement."
Seems to me that, in order to maintain compliance, the automated platform needs to, at minimum, somehow establish "reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due", AND create an associated log entry that adequately documents the evidence of compliance so that this evidence can be readily retrieved should the need arise.
I'd also note that a strict construction of the rule's language would require that whatever compliance arrangement is made be in place before the short sale order issues. Don't know whether that's really feasible in a HFT environment.
I see that the SEC today handed down a number of findings / orders regarding Knight Capital's little misadventure of 1 August last year (see SEC Release number 70694).
The document is interesting for several reasons, not the least of which is a reasonably detailed description of the event and failures or shortcomings that were involved.
One item I found interesting is a sanction for violations of the "locate" provisions of Regulation SHO. In light of the manner in which the SEC framed this discussion, I think a reasonable question is raised as to whether short sales can be effectively managed in automated trading application whilst adhering to the strict letter of Reg. SHO.
Knight was assessed a $12 million civil penalty, but that may pale in comparison with a Commission-ordered review and certificvation of their automated systems by an outside consultant.
With me-novice's permission, I'll expand on this a bit.
me-novice alluded to STP's situation as regards U.S. bondholders, but one need look no farther than the bankruptcy of their WuXi operating subsidiary to know that creditors can, and do, force bankruptcies in the PRC. In that instance, eight creditor banks were the petitioners.
You might find it helpful to read the "Enterprise Bankruptcy Law of the People's Republic of China", enacted in August of 2006, and becoming effective on 1 June 2007. Article 7 (found in Chapter II) deals specifically with this situation:
Where a debtor is under the circumstances as specified in Article 2 of this Law, he may make an application to the people's court for reorganization, compromise or bankruptcy liquidation.
Where the debtor cannot pay off his debts due, the creditor may make an application to the people's court for the debtor's reorganization or bankruptcy liquidation.
Where an enterprise legal person has been dissolved but has not started or completed liquidation and he does not have enough assets to pay off his debts, the person responsible for liquidation according to law shall make an application to the people's court for bankruptcy liquidation."
For the sake of clarity, here's Article 2:
Where an enterprise legal person cannot pay off his debts due and his assets are not enough for paying off all the debts, or he apparently lacks the ability to pay off his debts, the debts shall be liquidated according to the provisions of this Law.
Where an enterprise legal person is under the circumstances as specified in the preceding paragraph or he has apparently forfeited the ability to pay off his debts, he may undergo reorganization according to the provisions of this Law."
This translation was furnished by the National People's Congress of the PRC; I obtained it via the PRC Ministry of Commerce website in May of 2012.
I see that your first paragraph is paraphrased from an abstract published by TechNavio regarding their report due for release on 18 October. Cost will be $2,500.00 for a single-user license. Here's the complete abstract:
"TechNavio's analysts forecast the Global Lithium-ion Battery market to grow at a CAGR of 17.9 percent over the period 2012-2016. One of the key factors contributing to this market growth is the growing demand for Li-ion batteries in grid energy storage. The Global Lithium-ion Battery market has also been witnessing the advancement in technology. However, the high cost of Li-ion batteries could pose a challenge to the growth of this market.
TechNavio's report, the Global Lithium-ion Battery Market 2012-2016, has been prepared based on an in-depth market analysis with inputs from industry experts. The report covers the Americas, and the APAC and EMEA regions; it also covers the Global Lithium-ion Battery market landscape and its growth prospects in the coming years. The report also includes a discussion of the key vendors operating in this market.
The key vendors dominating this market space are Panasonic Crop., Samsung SDI Co. Ltd., LG Chem Ltd., and Sony Electronics Inc.
Other vendors mentioned in the report are Amperex Technology Ltd., Build Your Dreams (BYD) Battery Co. Ltd., Boston-Power Inc., China BAK Battery Inc., Electrovaya Inc., EVE Energy Co. Ltd., Hitachi Maxell Ltd., Shandong Heter Lampson Electronic Co. Ltd, Tianjin Lishen Battery Co. Ltd, Valence Technology Inc.
Key questions answered in this report:
What will the market size be in 2016 and what will the growth rate be?
What are the key market trends?
What is driving this market?
What are the challenges to market growth?
Who are the key vendors in this market space?
What are the market opportunities and threats faced by the key vendors?
What are the strengths and weaknesses of the key vendors?"
I see that even CBAK and VLNC are mentioned. Nice find!
The Court has handed down a default judgement and Final Order in SEC vs China MediaExpress Holdings, Inc., (formerly CCME on the NASDAQ) and Zheng Cheng (see 13-CV-00927, U.S. District Court for the District of Columbia).
Damages awarded consist of $41,894.082.05 illegal gains disgorgement and pre-judgement interest, plus a civil penalty of $7,250,000. Now, of course, we see whether the SEC can enforce the judgement.
This case merits some attention because CCME's failure to make their periodic filings clearly is part of the decision. It is also noteworthy because it arises from the SEC case against the "Big Four" accounting firms (in this case, Deloitte).
A separate investor class action (11-CV-00804, S.D. New York) remains unresolved.
I appreciate the detail, thanks.
Over the week-end, I gathered a few other tidbits:
The International Business Times has a piece that includes copies of reports from the Kent (WA) Regional Fire Authority. One of these is an "after-action" report filed by Scott A. Galassi, one of the first responders. Galassi has several interesting observations, but does make it clear that he believed he had no alternative to cutting into the battery containment if the fire was to be extinguished.
I also found a piece on the Kent (WA) Reporter online site that reinforces Galassi's contention.
Additionally, I have secured a copy of Tesla's First Responder guidance document for the Model S. It probably could stand to have some more detail, or more explicit guidance, as to how best to introduce water to the battery per se in these particular conditions.
This, of course, is how many product improvements evolve, and I'll be interested to see what ultimately results here.
I've been involved in crash investigations myself where some fairly large parts initially seemed to have disappeared, and were eventually found by expanding what we had supposed to be the practical limits of the crash debris field. When highway speeds, or very heavy vehicles at modest speeds, are involved,m there's a terrific amount of energy released in the collision event, and even items such as wheel hubs, rail car wheels, even engines, can be propelled for several hundred meters.
Well, the latest word I've seen (from ABC news) indicates that the driver struck a "...large metal object..." in the roadway, which either punctured, or somehow circumvented, the metal battery enclosure on the Model S. This compromised one of 16 battery cells, leading to the fire.
The only other noteworthy comment was from one of the responding firefighters, who remarked that the metal enclosure of the battery module interfered somewhat with fire suppression efforts, but I didn't get the sense that he found it to be a major failing so much as an inconvenience, with room for improvement.
The also noted the compartmentalization of battery cells in the Model S, and cited this as preventing or mitigating the wider propagation of the fire.
So, while it's certainly not the sort of event that is pleasant for any manufacturer, there probably are some positive bits of news emerging.
Evidently unimpeded by the government shutdown, the SEC today issued an Order Instituting Proceedings (OIP) today requiring China Ritar Power (CRTP) to show cause why they should not have their registration revoked for failing to make their periodic filings (since 3Q 2010).
Trading is suspended in CRTP effective from this morning through midnight on 17 October.
CRTP is yet another thin volume stock; last trading was just 1,000 shares on 2 October, closing at $0.36.
I see now that Tesla has issued a statement to the effect that the driver struck a metallic object in the roadway; of course, that could cover anything from an old tire iron to a shipping container.
The photo's aren't particularly revealing as to damage or potential causation, so I guess we wait for more information.
Doesn't sound all that appealing; where I come from we use those for bait. Might as well make mixed drinks with finger mullet.
I'm not so certain that this is a refund on VAT assessed on PV equipment. Rather, I think it's a refund of VAT assessed on electricity generated by photovoltaic power stations.
Here's the original MOFCOM statement:
Here's the operative paragraph from the Xinhua English Language news article:
"From Oct. 1, 2013 to Dec. 31, 2015, vendors of self-produced power products using solar energy will receive immediate refunds of 50 percent of the value-added taxes, the ministry said in a brief statement."
From ChinaScope Financial:
"China’s Ministry of Finance today released a circular, specifying that photovoltaic (PV) power plants will be allowed to receive a 50 percent value-added tax (VAT) rebate upon tax payment starting from October 1, 2013 and ending on December 31, 2015, in its latest move to boost the nation’s PV industry.
Based on preliminary calculations, if the VAT rate for PV power plants decreases 8.5 percentage points from the current level of 17 percent, the on-grid power price is expected to increase by CNY 0.0002 to CNY 0.0004 per kWh, thereby increasing the rate of return for PV power plants by 1 to 2 percent. As such, the VAT rebate measure will not only directly benefit PV power plant operators, but also help boost downstream PV equipment sales."
There is precedent for this; certain types of CHP plants are eligible for a 100% VAT refund, and some biomass generators receive a 50% refund.
I think this is how they avoid violating WTO rules; the refund doesn't go to the equipment manufacturer, but serves as a roundabout subsidy to the power station developer.
"you get about a 1 month warning."
Perhaps yes, [perhaps no. Recall last week's suspension / revocations (CLTT and CHWM); they were suspended for two weeks, with the suspension order issuing the same day as the "show cause" order. Both were revoked on the third day following the end of the suspension period.
For those two, it really made little difference, as they had pretty much zero volume for weeks preceding, but if you needed to exit there, you had effectively a two day window.
"It was the back property taxes that had to be brought current."
Again, glad I don't live there. I gripe about our taxes here, but this is the sort of thing that puts them in perspective. Doesn't make them less of an outrage, mind, but still...