Financial fraud cases in China are frequent, Jin Tongling’s financial fraud case has new developments.

In recent years, there has been a surge in illegal activities such as fraud and financial fabrication involving Chinese listed companies. One such case is the “Jintongling Financial Fraud Case,” where a high-tech enterprise under the state-owned assets supervision and administration commission in Nantong City, Jiangsu Province, has been found to have engaged in financial fabrication for a period of six years. This case has implicated the DHUA Certified Public Accountants Firm and four securities institutions.

According to reports from various sources and regulatory documents released by the Shenzhen Stock Exchange on May 14th, disciplinary actions have been taken against DHUA Certified Public Accountants Firm and Huaxi Securities, while Guangda Securities, Dongwu Securities, and Guohai Securities have been criticized for their involvement in the Jintongling case.

DHUA Certified Public Accountants Firm, the auditing institution for Jintongling’s financial statements from 2017 to 2022, and the underwriter for its 2020 equity increase, has been penalized. Huaxi Securities served as the sponsor for Jintongling, while Dongwu Securities acted as the main underwriter for its bonds.

Jintongling Technology Group Co., Ltd., a state-owned enterprise based in Nantong, Jiangsu Province, has been found to have committed financial fabrication over a span of six years, resulting in administrative penalties in November 2023. The total fines imposed on the company and individuals amount to 5.7 million yuan.

The official announcement revealed that Jintongling inflated its operating income by approximately 1.135 billion yuan and exaggerated its profits by 468 million yuan. It also falsely reduced its operating income by about 202 million yuan and diminished its profits by 38.5277 million yuan.

During the six-year period of financial fabrication, Jintongling engaged in various capital operations including equity increases, bond issuances, and mergers and acquisitions.

Established in 1993, Jintongling focuses on providing comprehensive solutions for wind systems in the field of centrifugal fans. It is registered in Nantong, Jiangsu Province, with its controlling shareholder being the Nantong State-owned Assets Supervision and Administration Commission, and Nantong Industry Holding Group Co., Ltd. as its largest shareholder.

The issue of fraudulent issuance and financial fabrication in Chinese listed companies is becoming more prevalent, with Jintongling being just one example. Since April 12th, a total of 25 listed companies have announced being under investigation, averaging more than one per working day. On May 8th, ST Huatie, Weichuang Group, and Puli Pharmaceutical, among others, were collectively investigated. On April 30th, Caesar Culture, Guanghui Logistics, and others faced investigations.

On May 7th, ST Yangguang’s controlling shareholder, Jiangsu Yangguang Group Ltd., was fined 230 million yuan for suspected insider trading of Huarun Suntech stocks, marking one of the largest fines in recent times. The most severe penalty was handed to *ST Xinxiang, a company involved in continuous financial fabrication for seven years, facing the possibility of being forcibly delisted due to major violations.

Compared to the same period in 2023, the number of listed companies under investigation has significantly increased. In 2023, the China Securities Regulatory Commission handled 717 cases of violations in securities and futures, resulting in fines totaling 6.389 billion yuan.