BEIJING (TheStreet) -- Duoyuan Global Water( DGW) shares fell hard on nearly 21 times the stock's average trading volume in Monday's regular session after a research firm with a short position in the stock accused the Chinese company of committing fraud.

The sell-off continued in extended trades following news from the company that Chief Financial Officer Stephen Park is resigning. The stock finished down 27% at $3.99, and was off another 9% to $3.63 in late trades. Volume was more than 8.6 million in regular trading vs. the issue's three-month daily trading average of around 416,000. More than 140,000 shares have changed hands in the after-hours session so far, according to


Duoyuan Global said Park is leaving the company to "pursue another professional opportunity" and that he plans to stay on board until either June 30 or the completion of a third-party review, whichever comes first.

The news appears ill-timed for

Duoyuan Global

, a China-based domestic water treatment equipment supplier. The catalyst for Monday's regular-session weakness was a contention that the company has actual revenue no greater than $800,000 annually, according to the latest report by Muddy Waters Research. Last year, Duoyuan Global Water reported annual revenue of $154.4 million, according to filings with the

Securities and Exchange Commission


Muddy Waters makes other strong claims against the Chinese company, including allegations that Duoyuan Global Water forged its audit report to Chinese officials, that there were four errors on the company's U.S. audit report, and that the company engages in "improper," undisclosed related-party transactions that transfer money to its chairman.

"DGW is a massive fraud, overstating revenue by over one hundred times," Muddy Waters wrote in its research report. "Our extensive surveillance of DGW's factory confirms our revenue estimates. DGW shows little evidence of using investor funds for capital expenditures. Its claimed distribution network is a sham."

Ashley Ammon, Duoyuan Global Water's investment relations contact in the U.S., said the company has no comment at this time.

Shares of Duoyuan Global Water were lately dropping $1.21, or 22%, to $4.28. The stock is down 64% this year alone. On Monday, trading volume topped 4.1 million shares, compared with the average daily trading volume of only 464,000 shares.

Duoyuan Global Water joins a growing list of

Chinese small-cap companies

with significant share price losses this year.


generated a list of some of the biggest decliners in chronological order, with some Chinese stocks falling as much as 75%.

Muddy Waters also makes ties between Duoyuan Global Water and sister company

Duoyuan Printing

( DYP). Both companies share the same chairman, Wenhua Guo. On Monday, Duoyuan Printing was banished from the

New York Stock Exchange

for failing to file a financial statement with the SEC since May 2010. On March 18, Duoyuan Printing disclosed that the SEC has been investigating the company for fraud since October.

Both Duoyuan Global Water and Duoyuan Printing have CFOs with no China experience and who do not speak Chinese, Muddy Waters claims. "In such situations, it is easy for the chairman to wall off the CFO, then commit fraud and steal money without the CFO's knowledge," Muddy Waters wrote in the research note.

Muddy Waters, which discloses in the research report that it stands to realize significant gains on a decline in Duoyuan Global Water's share price, has mixed results with past attacks on Chinese companies. Most notably,

Rino International


, a company that specializes in heavy environmental projects, was targeted in November by short-oriented research firm Muddy Waters.

The allegation was that Rino didn't have as many customer contracts as it had claimed. The company's CEO soon told auditors that the charge was partly true, admitting that two customer contracts had not been signed. Rino's CEO also said there might be problems with 20% to 40% of its other customer contracts. The stock was delisted from the


as a result.

Shortly after Muddy Waters published a story on March 2 titled "CCME: Irrefutable Evidence of Fraud,"

China MediaExpress

( CCME) announced that its auditor and CFO resigned. On Monday, China MediaExpress announced that the Nasdaq notified the company that it is "exercising its discretionary authority" to suspend trading in the stock on April 12.

On the other hand,

Orient Paper


, Muddy Waters' first target, ultimately determined its accounting was clean after a long investigation into accusations of fraud and misappropriation. However, Orient Paper on March 23 disclosed that its 2008 financial results were audited by a firm that didn't have an accounting license.

-- Written by Robert Holmes in Boston


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