LAKE CHARLES, La. (CN) - Sinotech Energy, a Chinese oil-services company, and two of its top officers misled investors about its assets and how it would use $120 million from its IPO, and Sinotech's chairman of the board, in a separate caper, stole $40 million from the company, the SEC claims in Federal Court.
The SEC sued Sinotech Energy Ltd., its chairman of the board and controlling shareholder Qingzeng Liu, its CEO Guoqiang Xin, and its CFO Boxun Zhang. All live in China. Sinotech is a Cayman Islands corporation that operates out of China, with an officer in New York City.
"SinoTech Energy Limited grossly overstated the value of its primary operating assets in financial statements, specifically the lateral hydraulic drilling (LHD) units that are central to its business," the SEC said in a statement announcing its lawsuit. "The company's IPO registration statement in November 2010 promised investors it would spend $120 million raised in the IPO to acquire LHD units, but the company's purchase contracts and other documents otherwise show it acquired far fewer LHD units, lied about the number it acquired, and grossly overstated the value of the units. SinoTech CEO Guoqiang Xin and former CFO Boxun Zhang were responsible for the fraud.
"Meanwhile, the company's chairman Qingzeng Liu is accused of secretly siphoning at least $40 million from a SinoTech bank account in the summer of 2011. He then stood silently by as SinoTech - attempting to counter negative Internet reports that the company was potentially fraudulent - falsely assured investors that the company had that money and more in the bank. Liu later admitted his theft to SinoTech's auditor and board of directors, but he retained his position and investors were not informed of the incident."
The SEC's regional director in Fort Worth described SinoTech's "brief life as a public company in the U.S. markets [as] rife with falsehoods."
The SEC seeks disgorgement, penalties and injunctions.
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