Loopholes From Here to China
NEW YORK (TheStreet) -- When allegations of fraud torpedoed the stock of China-based Rino International (RINO) last month, investor J.M. Hughes lost 56% of his investment -- or nearly $19,000 -- in less than a week.
The attack came from a short seller -- a firm betting that the stock would decline -- so at first Hughes wondered whether the source ought to be "held accountable." It turned out that the allegations were on target, and that the short seller had uncovered accounting discrepancies that U.S. regulators, auditors and exchanges had missed.
Rino came clean, acknowledging in a filing with the Securities and Exchange Commission that two customer contracts questioned by the shorts had not in fact been signed. Worse, the company said there might be problems with 20% to 40% of its other customer contracts. Rino shares, which had traded near $19 before the trouble started, dropped to $6 when trading was halted Nov. 18. The Nasdaq then delisted the stock, and Rino now trades on the Pink Sheets, recently at around $3.50. All told, investors saw more than $400 million in market value wiped out.
Today, Hughes wonders where the regulators and auditors were."Something that simple should have been picked up by the auditors," he wrote to TheStreet.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV