San Diego, CA -- (ReleaseWire) -- 10/10/2012 -- An investor in shares of China Agritech (NASDAQ:CAGC) filed a lawsuit in the U.S. District Court for the District of Delaware against China Agritech over alleged securities laws violations.
If you purchased shares of China Agritech (formerly, NASDAQ:CAGC, now trading at OTC Pink: CAGC) between November 12, 2009 and March 11, 2011, you have certain options and there are short and strict deadlines running. Deadline: December 7, 2012. NASDAQ:CAGC investors, who lost a substantial investment, should contact the Shareholders Foundation at mail(at)shareholdersfoundation.com or call +1(858) 779 - 1554.
According to the complaint the plaintiff alleges on half of all persons or entities that purchased the securities of China Agritech (NASDAQ:CAGC) between November 12, 2009 and March 11, 2011, that China Agritech, Inc. and certain of its officers violated the Securities Exchange Act of 1934 by issuing allegedly materially false and misleading statements regarding China Agritech’s business operations, financial condition and prospects.
More specifically, the plaintiff claims that China Agritech overstated its revenues and omitted to disclose significant related-party transactions.
On November 12, 2009, China Agritech filed a Form 10-Q with the U.S. Securities and Exchange Commission (“SEC”) reporting its third quarter results.
The plaintiff says that the statement was false because it materially misstated China Agritech’s revenue and net income for the quarter.
China Agritech’s Form 10-K, filed with the SEC on April 1, 2010, contained similar misstatements about its revenue and net income, in addition to concealing related-party transactions involving China Agritech’s Chief Executive Officer. The form indicated that China Agritech purchased 15% and 12% of its raw materials from Shenzhen Hongchou Technology Company Ltd. (“Shenzehn Hongchou”) in fiscal 2009 and 2008, respectively.
However, so the plaintiff, it failed to disclose that during that time, Defendant the Chief Executive Officer owned 90% of Shenzhen Hongchou.
On February 3, 2011 analyst firm LM Research issued the report alleging, among other things, that the China Agritech’s statement of revenue and earnings for the fiscal year 2009 are materially false and misleading and that the “China Agritech does not have a currently functioning business generating anything close to $100 million in revenue” and that they “are very confident that the company is a scam.” The Report, citing sources, claims that China Agritech’s U.S. financial statements were materially different than the financial statements filed with Chinese authorities by a number of China Agritech’s subsidiaries. The report claims that the revenue reported in the China Agritech’s SEC filings for 2009 is ten times larger than what the Chinese regulatory reports show. The LM Research report also noted a number of potential red flags of fraud within China Agritech Inc.
Then, on February 15, 2011, Bronte Capital issued a scathing report presenting additional facts indicating that China Agritech was engaged in fraud and could not possibly have produced the revenue it claimed in its financial statements.
On March 13, 2011, China Agritech announced the formation of a Special Committee of its Board of Directors to investigate the allegations of fraud that the Company maintained had been made by third parties.
The next day, China Agritech announced in a Form 8-K filed with the SEC that Ernst & Young Hua Ming had been dismissed as China Agritec’s independent auditor.
On March 14, 2011, the NASDAQ halted trading in China Agritech stock with its share price at $6.88 per share and initiated delisting proceedings.
On May 20, 2011, after being delisted by the NASDAQ, China Agritech shares opened for trading on the pink sheets under PINK:CAGC.
On March 20, 2012, shares in China Agritech closed at $3.80 per share, a decline of $3.08 per share, or almost 45%.
Since then PINK:CAGC shares lost substantial value and closed on October 9, 2012, as low as $0.12 per share.
Those who purchased shares of China Agritech (formerly, NASDAQ:CAGC, now trading at OTC Pink: CAGC) between November 12, 2009 and March 11, 2011, have certain options and there are short and strict deadlines running. Deadline: December 7, 2012. NASDAQ:CAGC investors, who lost a substantial investment, should contact the Shareholders Foundation.
Shareholders Foundation, Inc.
3111 Camino Del Rio North - Suite 423
92108 San Diego