China RTO Pump-and-Dump Scam Alleged
NEW YORK (TheStreet) -- As more and more Chinese small-cap companies come under attack as fraudulent, an alleged pump-and-dump scam involving Chinese reverse-merger stocks came to light earlier this week.
According to an indictment unsealed in U.S. federal court in Detroit -- and a parallel civil suit filed by the Securities and Exchange Commission on Tuesday -- a group of promoters, stockbrokers and company executives conspired to ramp up prices in the thinly traded shares of Chinese businesses that had come public in the U.S. via reverse mergers, then dump the stocks for a profit.
Court documents claim that the conspirators made $33 million between 2005 and 2007.
Several of the stocks still trade on the over-the-counter bulletin board, where most Chinese reverse-merger companies begin life as U.S.-listed entities. Those companies include China Digital Media (CDGT), which purports to provide cable-television "operational support services" out of Kowloon, and Worldwide Biotech (WWBP), which says it's a drug developer based in the city of Xi'an.
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 Plus 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