(China Green Agriculture story updated to include further details from the J Capital research report.)NEW YORK ( TheStreet) -- Shares of China Green Agriculture ( CGA - Get Report) closed 10% lower Tuesday after a small equities research firm issued a report accusing the company of fraud. The firm, Beijing-based J Capital, said in its report that it had found "compelling evidence that China Green Agriculture ... has vastly inflated the sales and profit figures it reports to investors." China Green closed Wednesday at $8.11, down 10.4%, on volume of more than 3 million shares, six times the daily average turnover in the name. J Capital cited financial records filed by China Green with a Chinese government bureau called the State Administration of Industry and Commerce, or SAIC. Those filings show that China Green Agriculture's main operating unit took in revenue of $8.4 million in calendar 2009, J Capital said in its report. The company reported revenue for the same period of $41.8 million to the Securities and Exchange Commission, according to the report. >>The Shanghai Numbers: A Special Series by TheStreet In September, China Green issued a press release defending the accuracy of its filings in the U.S. "It is well documented that reports filed with
China Green has long been a controversial stock. A small organic-fertilizer producer based in the city of Xi'an, in central China, China Green is one of hundreds of Chinese companies that have come public in the U.S. through a process known as a reverse merger. Allegations and revelations of financial fraud have beset these companies over the last year, and the SEC has launched a probe into those allegations, according to people with knowledge of that investigation. The SEC has declined to comment. China Green has not been immune to allegations similar to those published by J Capital. Short-sellers active in the Chinese small-cap sector have for some time believed that China Green has been fudging numbers. A report this past summer, for example, also cited discrepancies between the company's SEC and SAIC records. China Green, which went public in a reverse merger in 2007, has seen its stock trade as high as $18. It reached that point in December 2009, not long after it began trading on the New York Stock Exchange. The stock was uplisted to the American Stock Exchange in March 2009 from the over-the-counter bulletin board. The J Capital report enumerates a series of other allegations, including "dubious related-party transactions," "possible self-dealing," and "false claims about technology." According to J Capital's Web site, the firm was founded in 2007 to "provide deep-dive analysis" of Chinese companies, both on the long and short side. It sells its research to institutional investors and sometimes takes positions in the stocks it analyzes, according to the firm. In its report on China Green Agriculture, the firm didn't say whether it had a short position in the stock, although it noted that some of its clients did. J Capital released the China Green report on its Web site. It's the only research note listed in the "recent reports" section of the site. -- Written by Scott Eden in New York >To contact the writer of this article, click here: Scott Eden. >To follow the writer on Twitter, go to http://twitter.com/ScottEden. >To submit a news tip, send an email to: firstname.lastname@example.org.