China's a great place to invest. Who could possibly lose money in such a market?
Well . . . .
"ChinaCast, founded in 1999, is a forprofit
postsecondary education and e-learning services
provider that sells distance learning and “multimedia
education content” over the Internet and from three campuses
in China. . . . ChinaCast boasted a
market capitalization topping $200 million and was listed on
the NASDAQ Global Select Market. ChinaCast’s stock
offerings in the United States in 2008 and 2009 generated $48
million in net proceeds. . . .
[T]he complaint alleges, ChinaCast’s founder
and CEO, Ron Chan Tze Ngon (“Chan”), looted the
company’s coffers, including proceeds from the U.S. stock
offerings. From June 2011 through April 2012, Chan
“transferred” $120 million of corporate assets to outside
accounts that were controlled by him and his allies. In
addition, Chan permitted a company vice president to move
$5.6 million in company funds to his son; “unlawfully
transferred control” of two of ChinaCast’s private colleges
outside the company; and pledged $37 million in company
assets to secure third-party loans unrelated to ChinaCast’s
business. These actions brought ChinaCast to financial ruin.
The company cannot even afford its legal bills, according to
its lawyers, who submitted a bare-bones brief on appeal and
stated that “ChinaCast now unfortunately lacks the funds
necessary to mount with full vigor the defense of this appeal.”
In the midst of this fraud on multiple fronts, Chan and
ChinaCast Chief Financial Officer Antonio Sena participated
in a series of earnings calls and other communication with
investors. During these calls, neither official disclosed the
fraudulent activities taking place; instead, Chan emphasized
the company’s financial health and stability. For example, in
a press release and conference call in fall 2011, Chan
reassured investors that “no questions or concern[s] have ever
been raised by the company’s auditors or audit committee
about our cash balances.” Throughout 2011, Chan signed
SEC filings on behalf of ChinaCast and never disclosed the
$120 million in transfers and other fraudulent activities afoot."