SFC wins court order to wind up China metal recycler for forgery
Thursday, 26 February, 2015, 10:17pm
Eric Ng email@example.com
The Securities and Futures Commission won a landmark court order to wind up China Metal Recycling (Holdings), which said it was the mainland’s largest recycler of scrap metal but was alleged by the SFC to have grossly inflated sales and profit by forging documents and transactions. It is the first time the securities watchdog has obtained a court directive to liquidate a Hong Kong-listed firm under the Securities and Futures Ordinance to protect minority shareholders and creditors. The SFC said CMR overstated its sales by about 46 per cent, or HK$8 billion, and its gross profit by 72 per cent or HK$1 billion between 2007 and 2009.
“This is an audacious and dishonest scheme using multiple secret nominees established all around the world to deceive Hong Kong investors and creditors into believing [CMR] had a track record and a performance that it simply did not have,” said SFC executive director of enforcement Mark Steward. The SFC said CMR devised a complex scheme to inflate its sales and profit dating back to its 2009 initial public offering prospectus, using a Macau subsidiary as a “factory” for generating false documents. The scheme involved fake shipments of scrap metal between the United States and mainland China, false shipping documents and accounts, and “highly complex round robin” transactions spanning continents. The Macau unit, Central Steel Macao, had made 431 payments totalling US$2.4 billion to purported suppliers in the US and Hong Kong in 2012, the SFC said. Almost all were ultimately sent back to the Macau unit.Former China Metal management had denied any wrongdoing and had opposed the SFC’s wind-up order application, but later withdrew from the case. The firm raised HK$1.69 billion from its flotation.