you're reading...
Crime & Corruption

Longtop fraud willingly backed by Chinese banks

Longtop Financial, a popular Chinese software company, was exposed as a colossal fraud last year .The “cash balance” on Longtop’s balance sheet, it turned out, was fake;  a fiction created by the company’s managers and helpers.

The Longtop fraud followed other China stock frauds that have made many of Wall Street’s best and brightest look like fools. It has also increased the scepticism of American investors toward Chinese companies.

Unlike some of the more famous American-company frauds in recent years , like Enron and Worldcom, it turned out that Longtop had institutional help in perpetrating its fraud. The reason Longtop was able to fend off sceptics for so long, despite multiple analysts arguing that it was a fraud, was that Chinese banks were complicit in the scam.

According to an extraordinary letter that Longtop’s auditor, Deloitte, sent the company when it quit, Longtop’s banks sent out fake statements attesting to the company’s fake cash balances. It wasn’t until Deloitte’s examiners actually physically visited the banks, and talked to other employees at the banks, that the fraud was discovered. And even then Deloitte employees were restrained at the bank and made to give up all the incriminating files they had unearthed!

The Longtop fraud fooled some of smartest hedge funds and mutual fund investors in the country. It fooled the New York Stock Exchange. It fooled the investments banks that underwrote Longtop’s stock – and defended it until its dying breath, claiming all sorts of “due diligence” designed to set investors’ fears to rest. And, for a long while, it fooled Deloitte.

It serves as a good reminder that all you really may be investing in when you invest in any stock, are just black marks on a page.


About Craig Hill

General Manager at Craig Hill Training Services * Get an Australian diploma by studying in your own country * Get an Australian diploma using your overseas study and work experience * Diplomas can be used for work or study in Australia and other countries. * For more information go to www.craighill.net


5 thoughts on “Longtop fraud willingly backed by Chinese banks

  1. Reblogged this on Craig Hill.


    Posted by Craig Hill | April 11, 2012, 11:11 pm


  1. Pingback: re: The Auditors » Blog Archive » Why Is The SEC Pursuing Deloitte Shanghai? Looks Like It’s Personal - May 11, 2012

  2. Pingback: Is Xinyuan Real Estate A Fraud? @ Real Estate news - July 6, 2012

  3. Pingback: Clampdown in China on Corporate Sleuthing « China Daily Mail - July 21, 2012

  4. Pingback: Chinese companies pull out of US stock markets « China Daily Mail - August 15, 2012

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

China News

China News is not affiliated in any way with any publication in China or anywhere else.

Enter your email address to receive an email each time an article is published, or join our RSS feed. 100% FREE.

Join 3,583 other followers

Want to write for China News?

Read “Contributor Guidelines” above to join our team of 76 contributors. Write news or opinion about issues in China, or post photos and video. Promote your own site.

Recent Posts

China News Articles Have Been Featured In:

%d bloggers like this: