Investing in Longtop — the Case of Longtop Financial Technologies (B)


Longtop Financial Technologies (Longtop), a company registered in the Cayman Islands, went public on the NYSE in 2007. After four years of significantly above average revenues and profits, Citron Research, a research firm that specialized in exposing fraud among Chinese stocks, posted an online report on Longtop, accusing the company of fraudulent accounting: “It is the opinion of Citron that every financial statement from its IPO to this date is fraudulent”. In May 2011, Longtop’s auditor, Deloitte Touche Tohmatsu CPA Ltd. China (Deloitte Shanghai), resigned. It said that Jia Xiao Gong, Longtop’s chairman, had admitted false profits and false cash flows recorded on the books in the previous years. On 14 December, the American Stock Exchange Committee (SEC) revoked the registration of Longtop for failing to file required annual reports and audited financial statements with the SEC. Longtop investors had already filed a lawsuit against the company to recover losses incurred on their securities being made substantially worthless as a result of allegations.


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Published by:China Europe International Business School

Publish Date:2012-01-01


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