September 27, 2011 / 2:31 AM / in 6 years

Chaoda Modern accused of fraud by online activists Anonymous

* Anonymous allege Chaoda management siphoned money out of co

* Chaoda facing lawsuit from HK Market Misconduct Tribunal

* Anonymous says to release more reports on corporate fraud

* Anonymous has indirect interest in Chaoda share price falling

By Rachel Armstrong

SINGAPORE, Sept 27 (Reuters) - An online activist group has alleged the management of Chinese fruit and vegetable producer Chaoda Modern Agriculture (Holdings) Ltd , already under investigation in Hong Kong for market misconduct, has defrauded the company of more than $400 million.

Anonymous Analytics, which says it is a faction of cyber hacking group Anonymous, has published a 38-page report accusing the company of misleading investors about its cash holdings, capital expenditure, and falsifying its financial statements.

On Monday, before Anonymous published their report, Hong Kong’s government confirmed the city’s Market Misconduct Tribunal was investigating Chaoda although declined to give any further details. The news of that investigation sent Chaoda shares tumbling more than 26 percent before they were suspended from trade.

Chaoda’s shares are already down around 76 percent since late May, when it was accused in Chinese-language Next Magazine of overstating the size of its farmland in Beijing, Hebei, Tianjin and Fujian.

The company denied all of those allegations and brought back some of its own shares after the report caused its stock to drop 22 percent.

In the latest report, Anonymous claimed Chaoda management had siphoned out about 2.3 billion yuan ($360 million) from the company under the guise of capital expenditure.

Anonymous also alleges that Chaoda’s main fertilizer supplier, Fujian Chaoda Trading, which Chaoda chairman Kwok Ho has a majority stake in, is in fact a shell company used to smuggle money out of the company.

“Under the cover of inflated capex spending and related party transactions, management has transferred more than $400 million out of Chaoda,” the report concluded.

Eric Yip, a spokesman at Chaoda’s public relations agency, said the company is looking at the report and may issue a clarification statement later. On Monday, the company said its shares were suspended from trading pending the release of price sensitive information.

A string of Chinese companies listed in North America have been accused of fraud by investors which held short-positions in their stock. This, however, is the first major report of this kind issued on a company listed on the Hong Kong stock exchange.

Anonymous, better known for hacking government and company websites, said it plans to release more reports exposing companies it claims are fraudulent.

Anonymous disclosed that it has an indirect interest in a fall in Chaoda’s share price due to short positions held by its “associates, partners, affiliates, consultants, clients, and other related parties”.

According to Thomson Reuters data, Blackrock Financial Management Inc held a 4.3 percent stake in the company as of September 14 while Janus Capital Management was recorded on March 22 as having an 8.13 percent holding.

Chaoda, which listed on the Hong Kong stock exchange in 2000, says on its website that it has more than 44,282 hectares of farmland at 31 different production bases across China. It said it grew and sold 2.7 million tonnes of fruits and vegetables in 2010. ($1 = 6.389 Chinese Yuan) (Editing by Lincoln Feast)

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