US securities regulators on Wednesday set fines at more than US$250 million against two Chinese executives accused of looting formerly US-listed Puda Coal Inc (普大煤業).
The US Securities and Exchange Commission (SEC) set the default judgement against Zhao Ming (趙明), Puda’s chairman, and former chief executive Zhu Liping (朱立平).
The agency said the pair had already stripped the firm of its main asset before Puda raised US$116 million in two US public offerings in 2010.
While investors soaked up the offerings based on the potential of Puda’s ostensibly 90 percent-owned profit-generating mining subsidiary, Shanxi Coal (山西煤業), Zhao had already secretly transferred Shanxi’s shares to himself a year earlier, according to the SEC case filed in 2012.
Zhao had then handed 49 percent of Shanxi Coal over to Citic Trust Co Ltd (中信信托), a unit of giant Chinese investment bank Citic Group (中信集團), in exchange for 1.2 billion preferred shares in a new coal investment fund.
Zhao also pledged 51 percent of Shanxi’s assets to Citic for a US$370 million loan.
“Zhao and Zhu perpetrated a massive fraud on Puda’s public shareholders by effectively stealing and selling Puda’s operating subsidiary,” the SEC said.
“At the same time that Citic Trust was effectively selling interests in the coal company to Chinese investors, Zhao and Zhu were still telling US investors that Puda owned a 90 percent stake in that company,” the SEC said.
The result was that Puda’s share value was wiped out, with heavy losses for investors.
The fines were issued as a default judgement, which usually comes when parties do not defend themselves against charges.
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