Brokerage firm Macquarie Capital allegedly cost investors millions of dollars by underwriting the public offering of a fraudulent China-based company, according to charges announced March 27 by the U.S. Securities and Exchange Commission (SEC).
Macquarie had received a due diligence report revealing the China-based Puda Coal to be a shell company, the charges alleged. Former junior investment banker William Fang sent out an email 29 minutes after reading the report stating “No red flags were identified.”
The brokerage firm continued with the equity raising, selling $108 million in Puda shares.
Shares Worthless
The complaint and charges come three years after the SEC charged Puda CEO Ming Zhao for taking Puda’s 90 percent stake in Shanxi Coal, Puda’s sole source of revenue. Zhao, a wealthy businessman with connections to Beijing, then gave half of Shanxi Coal in equity interest to a private equity fund controlled by a state-owned Chinese investment firm.