Recently, the Chinese petrochemical equipment company *ST Zhuoran, listed on the mainland, has been engaged in financial fraud since its listing year. From 2021 to 2024, it has fraudulently inflated profits by approximately 287 million yuan. After four years of ongoing deception, the company received a pre-notification letter of administrative penalties on September 11 and is now facing delisting.
According to the announcement by Zhuoran Holdings on September 12, the company arranged for funds to be transferred back by related parties or third parties, creating the illusion that accounts receivable had been collected, thus underestimating bad debt provisions and credit impairment losses, thereby inflating profits.
The company also misrepresented its performance by prematurely recognizing revenue, fabricating business, and using inaccurate financial data from joint ventures.
In 2023, Zhuoran Holdings falsified operating income by 363 million yuan, accounting for 12.25% of the disclosed revenue for that year. The total inflated profits amounted to 224 million yuan, equivalent to 148.33% of the disclosed profit total for the year.
Zhuoran Holdings went public on the Shanghai Stock Exchange’s Sci-Tech Innovation Board in September 2021, raising approximately 920 million yuan in its initial public offering of shares. Financial fraud began in the same year.
In 2021 and 2022, the company fraudulently inflated profits by about 43.84 million yuan and 13.72 million yuan respectively. In 2024, it further inflated operating income by 231 million yuan and total profits by 5.5772 million yuan. Combined with the 224 million yuan inflated in 2023, the total fraudulent profits over the four years amounted to about 287 million yuan.
The pre-notification letter also revealed that Zhuoran Holdings’ IPO prospectus and 2021 annual report failed to disclose related-party transactions between the controlling shareholder and controlled enterprises, with transactions reaching 292 million yuan and 470 million yuan in 2020 and 2021 respectively.
According to the pre-notification letter regarding financial fraud and significant omissions, Zhuoran Holdings faces a fine of 12.5 million yuan, with six responsible individuals collectively facing a fine of 35.8 million yuan.
Among them, the controlling shareholder and former chairman Zhang Jinhong faces a fine of 19.5 million yuan and a 10-year securities market entry ban, while the former vice general manager Zhang Xinyu faces a fine of 4.3 million yuan and a 3-year securities market entry ban.
On the same day, Zhuoran Holdings also received another pre-notification letter of penalties for failure to disclose its 2025 annual report within the statutory deadline, with the company facing an additional fine of 2 million yuan and responsible individuals collectively facing an additional fine of 1.6 million yuan.
These measures are currently under review. If the official penalty decision upholds the relevant findings, the company’s stock will be forcibly delisted.
In July of this year, Zhuoran Holdings was already under the risk alert of delisting due to delayed annual reports and audit issues. Its stock abbreviation changed from “Zhuoran Holdings” to “* ST Zhuoran”.
Since its listing, Guotou Securities, and its predecessor Anxin Securities, have been responsible for recommending and supervising Zhuoran Holdings, conducting continuous inspections post-listing.
According to previous reports by “Blue Whale News,” during the continuous supervision, Guotou Securities issued reports for multiple years stating no violations were found, raising questions about the thoroughness of their investigations.
Sun Yuhao, Senior Partner at Haihua Yongtai Law Firm, previously told “Blue Whale News” that if the issues in question were ones that the recommending institution should have discovered but did not, the institution and individuals involved may face regulatory measures, administrative penalties, or even civil liabilities.
The accounting firm involved in the case has also been subjected to investigation, and its responsibility in the aforementioned financial fraud is still pending clarification.