"For 13 years, I did my best to work for Nasdaq to make sure whatever companies I was sending to the U.S. were quality ones in compliance with regulations," said Xu. He no longer works for Nasdaq, but remains in China and is still helping Chinese companies get listed on U.S. stock exchanges.

No substantive conflict involving a Nasdaq official has ever come to light. A Nasdaq regulatory official declined to discuss the work of former employees, citing personnel policy. The exchange said it strictly forbids conflicts relating to new listings. The official said that, where a Nasdaq employee is involved in recruiting a company to list on the Nasdaq, "they would not be permitted to buy securities in the company that he or she was soliciting to list."
Benjamin Wey
Benjamin Wey

Asensio's issues with Xu stem from a press event that occurred in China two years ago. The purpose of the event was to announce a successful reverse merger and U.S. listing involving China's Shenyang Taiyu Machinery & Electronic Equipment. Xu attended the event. The RTO involving Taiyu was engineered via an American shell company called Pacific Goldrim Resources. The merged company is now known as SmartHeat ( HEAT) and is traded on the Nasdaq. The RTO deal was guided by Wey.

Explore the Small World of RTOs

SmartHeat hasn't faced any negative allegations and its shares have performed better than many other RTOs, but lately the stock has felt pressure from fears of dilution. The company's shares hit a high of $18.60 in January, before tumbling to $5 after the company on Nov. 18 announced a secondary offering of 5 million shares.

There has been concern about closeness between Xu and Wey among others involved in the small world of Chinese RTOs. According to one due-diligence investigator in China, who spoke on condition of anonymity, Xu visited two Chinese companies accompanied by Li Ming, a senior executive at Wey's firm.

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