However, the truth started to reveal itself regarding the accuracy of China Agritech’s financial statements. On February 3, 2011, the research firm LM Research published a report asserting that China Agritech was engaged in fraud. The report concluded that the Company’s financial statements were fraudulent, its purported revenue was overstated and that its plants were idle. As a result of the LM Research report, shares in China Agritech declined from a close of $10.78 on February 2, 2011 to $9.85 on February 3, 2011, on unusually high volume of over 2.6 million shares. Then, on February 15, 2011, Bronte Capital issued a scathing report presenting additional facts indicating that China Agritech was engaged in fraud and could not possibly have produced the revenue it claimed in its financial statements. As a result of the Bronte Capital report, shares in China Agritech declined from a close of $9.21 on February 15, 2011 to $7.44 on February 16, 2011, again on unusually high volume of over 2.8 million shares.On March 13, 2011, China Agritech announced the formation of a Special Committee of its Board of Directors to investigate the allegations of fraud that the Company maintained had been made by third parties. The next day, China Agritech announced in a Form 8-K filed with the SEC that Ernst & Young Hua Ming (“E&Y”) had been dismissed as the Company’s independent auditor. In explaining its reasons for the dismissal, the Company revealed that it had, in essence, concealed that E&Y had identified serious problems with its financial statements as early as December 15, 2010 and had informed the Company’s board that an internal investigation was necessary. Yet, the Company failed to correct the problems with the financial statements and failed to provide verification for certain transactions – prompting “E&Y [to] orally advise the Audit Committee that it may not be able to rely on management’s representations based on the issues identified.”
Additionally, on March 14, 2011, the NASDAQ halted trading in China Agritech stock with its share price at $6.88 per share and initiated delisting proceedings. On May 20, 2011, after being delisted by the NASDAQ, China Agritech shares opened for trading on the pink sheets. That day, shares in China Agritech closed at $3.80 per share, a decline of $3.08 per share, or almost 45%.If you wish to serve as lead plaintiff, you must move the Court no later than December 7, 2012. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Any member of the proposed class may move the court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member. Rigrodsky & Long, P.A., with offices in Wilmington, Delaware and Garden City, New York, regularly litigates securities class, derivative and direct actions, shareholder rights litigation and corporate governance litigation, including claims for breach of fiduciary duty and proxy violations in the Delaware Court of Chancery and in state and federal courts throughout the United States. Attorney advertising. Prior results do not guarantee a similar outcome.