The SEC charged
a China-based company and the CEO with fraudulently misleading investors about
its financial condition by touting cash balances that were millions of dollars
higher than actual amounts.
The case is the latest from the SEC's
Cross-Border Working Group that focuses on companies with substantial foreign
operations that are publicly traded in the U.S. The Working Group has enabled
the SEC to file fraud cases against more than 65 foreign issuers or executives
and deregister the securities of more than 50 companies.
The SEC alleges that China MediaExpress, which
purports to operate a television advertising network on inter-city and airport
express buses in the People's Republic of China, began falsely reporting
significant increases in its business operations, financial condition, and
profits almost immediately upon becoming a publicly-traded company through a
reverse merger. In addition to grossly overstating its cash balances, China
MediaExpress also falsely stated in public filings and press releases that two
multi-national corporations were its advertising clients when, in fact, they
were not. The company's chairman signed the public filings and attested to
their accuracy. After suspicions of fraud were raised by the company's external
auditor and an internal investigation ensued, the chairman attempted to pay off
a senior accountant assigned to the case.
"Investor confidence in the
representations made by publicly-traded companies is critically important to
the proper functioning of our financial markets," said Antonia Chion,
Associate Director in the SEC's Division of Enforcement. "China
MediaExpress and [its chairman] falsely reported whopping increases in its cash
balances and deceptively raised money from stock sales. Today's action
demonstrates the Commission's commitment to policing financial fraud in the
U.S. markets, regardless of whether it is perpetrated by persons who live here
or abroad."
For more information, visit EC Charges China-Based Company and CEO in Latest Cross-Border Working Group Case.
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The attorneys at Sallah Astarita & Cox include veteran securities
litigators and former SEC Enforcement Attorneys. We have decades of experience
in securities litigation matters, including the defense of enforcement actions.
We represent firms and brokers nationwide. For more information contact Mark Astarita at
212-509-6544 or at mja@sallahlaw.com
