The hacker collective Anonymous has a new research wing dubbed Anonymous Analytics – and it is already exposing one Chinese company that trades on the Hong Kong stock exchange. It accuses Chaoda Modern Agriculture (HKG:0682), China’s largest fruits and vegetables supplier, of “eleven years of deceit and corporate fraud.”
Or perhaps I should say that Chaoda used to trade there, as its shares were suspended on September 26, plummeting to a final low of HK$1.10. Chaoda executives are now facing a market misconduct lawsuit. So far only civil action is being taken, not criminal.
But Anonymous Analytics wants to take things further. Much further. On that same day, the activist group released its Chaoda exposé. In the 36-page report – download it from this page – it claims huge acts of fraud on the part of Chaoda’s CEO, Kwok Ho. The report says:
[Chaoda] management has time after time misled investors about the Company’s capital requirements […] Much of the money that is raised is transferred out of the Company by management and third parties. These transfers are carried out under the cover of grossly inflated capex spending, and related party transactions. We provide proof that payments made to a ‘major supplier’ owned by the CEO are simply being transferred to a shell company with no business operations and de minimis assets.
Furthermore, we show that the CEO has used shareholder money to invest in risky projects without commensurate returns. One of these projects was a poorly operated orange plantation (Asian Citrus) that even Pepsi Co. found too risky. While this project robbed shareholders of high returns, they enriched the CEO through similar related party transactions.
Anonymous Analytics even tracked down a consultancy which appears to be utterly fake, made only to look Chaoda look good. The group tracked down the firm only to find it was using the address of an MIT dorm in Cambridge, MA.
The fraud has some echoes of the Longtop (NASDAQ: LFT) scandal from earlier this year – see also the New York Times on that issue – which caused a nightmare for other Chinese tech IPOs, as they came to be viewed with great suspicion.
Anonmyous Analytics claims Chaoda might be “worth HK$0.60 per share” – nearly half of the value at which its trading was suspended.
The group’s tagline is “Acquring information through unconventional means,” which perhaps implies that Anonymous Analytics might use its hive-mind hacking skills to gather sensitive documents from Chaoda’s servers. That has been a tactic of Anonymous in general, as well as the short-lived LulzSec group, which brought down the PlayStation Network this summer in order to punish Sony.
Get the full report – direct PDF link here – to see more claims of gross corruption, as well as a detailed timeline of the astonishing number of resignations by auditors and directors, and some fine investigative reporting into the shell companies and duped experts that bolstered Chaoda.