Fushi Copperweld, Inc. (NASDAQ: FSIN) is a fraudulent company.
As a Chinese and a researcher, even before Muddy Waters reported the evidence of FSIN's accounting fraud, I have found evidence. I am writing down all the research I have made.
1. Frazer Frost:
Searching Compustat database, which is provided by WRDS (Wharton Research Data Services) and can be accessed through Columbia University library database system, I find each listed company's auditing firm. Among them, a notorious one comes into my eyes: Frazer Frost.
If you don't know Frazer Frost, I am listing the firms it has made listed:
Jiangbo Pharmaceuticals Inc (OTCPK:JGBO)
China Valves Technology Inc (OTC:CVVT)
China Natural Gas Inc (OTC:CHNG)
Harbin Electric Inc (NASDAQ:HRBN)
RINO International Corp (OTC:RINO)
Familiar with them? They are all found involved with fraudulent financial statements. Some of them have already been delisted.
You may have a question: how many firms in total has Frazer Frost helped make public? Are the five ones just the special cases? I can tell you : 13 firms. Among 13 firms there are 5 of them already found guilty, how much confidence do you have for the rest? Also, every single one of the 13 ones is through reverse merger. 5 have been found with fraudulent problems. And who's the next one? Fushi Copperweld. Frazer Frost made, reverse merger.
I will write separated articles about other Frazer Frost-made firms. But for now, let's look at FSIN.
I grew up in a business family and I have plenty of relatives who live in China doing business. Some of them have quite big firms. I myself began to show up in business occasions regularly since 5 years old. I have been in at least 1,000 business dinners before high school. I'm not saying that I have more experience than most others, but I am confident that I am experienced in distinguishing honest firms from fake ones.
An easy way to tell is the firm's website. It's hard for American investors and those who are not familiar with Chinese business. A basic rule is to look at the organization of the site and the font it uses.
Let's look at a website of a successful firm:
Notice that a Chinese firm's website always has this at the bottom:
They are the firm's address, phone number and the most important thing:
the registration number in SAIC: 鲁ICP备09018957号
Even in this firm's English site
it has the Chinese character registration number:
You can look at another firm:
See? At the bottom, it has 【苏ICP备05004547号】which is this firm's registration number.
But look at Fushi Copperweld:
It doesn't have it at all.
Moreover, don't you find it wield about the font of Fushi Copperweld's website? Well, if you don't read Chinese, you may not have any feelings, but to me, it is so obvious that this site is simply built via a template. Look at the
on Fushi's site, do you find it in ANY OTHER REAL Chinese firm's website?
NO because Facebook is blocked in China !
And these links only make Chinese investors have a feeling that it's not a serious business.
Another evidence may not be so understandable to American investors. The English version of a Chinese firm's website usually has some English language problem, making it look just like that the English is a bad translation from Chinese text. But Fushi Copperweld's Chinese version looks like it was translated from English. But which Chinese firm will write their English descriptions first? The only reason I can understand is there is some group helping this firm get listed and make money from it. And this is true.
3. "Gang Four"
Chinese media has reported that there was a group of four people (two Chinese Americans, two white Americans) helping some Chinese small firms getting listed on American stock exchanges. This is the procedure they did:
1) come to the firm, ask them for 40% shares
2) get them quoted on OTCBB
3) contact some lawyers and auditors, let them sign the forged financial statements (who knows how much they gave those people for signature)
4) transfer to NASDAQ/NYSE/AMEX
5) sell the stocks they have, run away, leaving the fooled American investors
Most of the fraudulent firms found out were getting listed through this procedure. It's very likely that FSIN is the same. Don't forget FSIN's location in China is only one block away from the fraudulent RINO's !
So it shouldn't be a surprise that FSIN's website was originally written in English, because they were very likely written by those native English speakers.
4. Pricing: it should be delisted if it forges the financial statements. But since Muddy Waters has released its different revenue reports to SAIC and SEC, we can see that the actually revenue is less than 1/7 of the amount it claims. Therefore the reasonable price should be less than 1 dollar.
Disclosure: I am short FSIN.