Advanced Battery Technologies


Advanced Battery Technologies Inc ., was a publicly traded NASDAQ company with executive offices Beijing, China and Flushing, NY with three other manufacturing campuses in mainland China that specialized in the development and manufacturing/assembly of rechargeable polymer lithium-ion batteries and electric vehicles, electric bikes and electric scooters.
ABAT was one of a long list of hundreds of Chinese stock frauds that listed in the US since 2008 that caused investors to lose tens or perhaps hundreds of Billions of dollars and was documented in the movie "The China Hustle". Activist shareholder Joel Caplan, who was pro-active in the litigation efforts of ABAT since 2011, notes that "the case of ABAT exposes the methodology for the ongoing, systemic, formulaic stock frauds perpetrated on a naive investing community which unjustly enriches Chinese Nationals and perhaps the CCCP itself", Caplan states. "Moreover, the latest example of fraud on the market is, of course Luckins Coffee and it just seems that the SEC and the US Department of Treasury are brainwashed or want to keep burying their collective heads in the sand about this issue, which puts US capital, US investors and in fact our national security interests at stake while empowering directly or indirectly the CCP and possibly the PLA", Mr Caplan. emphatically declares. Continuing he states "The SEC has allowed these stock frauds to go on for more than a decade despite calls by several Senators for this practice to end." Currently there are 4 Bills related to this issue in Congress. .
Federal Judge Colleen McMahon who stated in and open hearing that as of 2014, "53 China-based companies had already been deregistered by the SEC" Likewise and in a similar way, ABAT, before disappearing raised nearly $90,000,000 in various stock offerings over a period of years and worked its way up from the OTC to NASDAQ.
When ABAT was called out by several short seller reports for also filing fraudulent SEC filings by reporting grossly exaggerated revenues and net profits, ABAT's stock price started crumbling from $5.00/share to under 50 cents/share and various Class Action lawsuits commenced. Eventually, after not meeting NASDAQ's request for bank confirmations, ABAT was delisted from the and years later deregistered by the SEC and then subsequently held to be "in contempt of Court" in the Delaware Court of Chancery in Court Case 9542-VCMR.
Although ABAT did settle the previous Class Action lawsuit that began in 2011, shareholders received less than 1/3 of a penny per share even though the stock had dropped more than $4.00 per share. Mr. Caplan has suggested in Court Transcripts "that this paltry sum amounts to nothing more than a grab for the insurance money so that the lawyers can get their fees and there is no real punishment or disincentive to the bad actors that are the brainchild of these systematic scams."
Supporting this view, Honorable Judge McMahon commented in an open hearing on 14 February 2014 "What I know about this, I know about a little bit of context that there are a bunch of ABATs out there who have gone down this road, and then who have just plain disappeared." Mr. Caplan who attended and participated in this hearing and documented the above comment in his efforts to pursue justice and to "Stop the China Hustle." and was acknowledged by Judge McMahon for being "helpful." See page 17.
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Judge McMahon described efforts of a Court-appointed Receiver as a "meaningless exercise..... with broad and unspecified powers and no means of being paid whatever he is supposed to do. Plaintiff will need to convince Judge Francis with citations, more persuasive than citations than those offered to me, that the entry of any particular remedy is both warranted and likely to afford the Plaintiffs
Mr. Caplan from Jerusalem who after being defrauded by several Chinese companies and monitors actions similar to Advanced Battery Technologies, notes that in the case against China Mining Company EURO PACIFIC CAPITAL, INC. et. al. v. U.S. CHINA MINING GROUP, INC and HONGWEN LI Case No.: 1:15- cv-04636-CM, the plaintiffs attorneys simply dropped the case because they could not locate Mr. Li in the PRC. Attorneys on this case did determine a "fair value", just like in Advanced Battery Technologies but Mr. Hongwen Li, a PRC based CEO could not be served. As in the case of Advanced Battery Technologies 9542-VCMR, US China Mining Group, after raising at least $10,000,000 went "illegally dark" after the alleged fraud was discovered.
Similarly, ABAT's CEO, Zhigou Fu who led the company from a market cap of $250,000,000 to zero and completely wiped out all shareholders after ceasing to file 10-k's or 10-q's with the SEC. During the Course of the Class Action, Zhigou Fu wrote 2 letters to shareholders promising that the company would resume their filings and resume following SEC rules once the Class Actions were completed. However, like many Chinese Reverse Mergers, ABAT did not follow US Security laws and eventually broke many and ultimately was deregistered by the SEC for failure to file once the frauds were discovered.
In the words of activist shareholder Joel Caplan in Court Transcripts without SEC and governmental intervention, ABAT would be free "to waltz back to China with $100,000,000 with impunity and without consequence. Like dozens if not hundreds of other Chinese Reverse Mergers, ABAT hid in China and the money that was raised disappeared. Caplan states, "Advanced Battery Technologies is no different from more than two dozen other brazen stock frauds which are based on fictitious accounting and have defrauded US Shareholders out tens if not hundreds of Billiions of dollars even though this whole scam made the front page of the New York Times in May of 2011." Furthermore, until action is taken and laws to stop this practice are enforces, these systemic, formulaic and ongoing frauds will continue, Caplan states in Court Documents.
The company from 2003-2014 had manufactured electric bicycles, electric scooters, and electric sports utility vehicles and lithium-ion batteries but could not verify its reported revenues or profits upon request of NASDAQ. The company claimed in its SEC Filings that it exported its products to Europe, the United States, and Asia.
After a 4-year Class Action lawsuit, another action was brought against the company in the Delaware Court of Chancery. Finally, on 23 July 2015, the Delaware Chancery Court appointed Robert Seiden as the Court-Appointed Receiver over Advanced Battery Technologies in Case 9542-VCMR. The Delaware Court of Chancery awarded Southpaw Hedge Fund and a group of private shareholders known as the Duschesneau Shareholder Group a "put-option" valued at $27.50/share based on forensic accounting of the fabricated SEC reports that ABAT had filed with the SEC over 8 years before they went "illegally dark..
In 2019, the Court-appointed Receiver, Robert Seiden, after several years since being appointed, was able to negotiate an inadequate Settlement with Chairman Zhigou Fu of about 35 cents per share. Like many Chinese Reverse Merger companies that came to the United States, the capital raised was never recovered and the company ceased communicating with the SEC and its shareholders after raising nearly $100,000,000 based on reporting fabricated profits of $35,000,000 annually. Equitable tolling principles may still apply in this case in light of a pattern of deception over more than a decade of Chinese companies seeking US capital based on false pretenses and fictitious filings.

Products and technologies

Advanced Battery Technologies before it got deregistered and went out of business was most known for its development and manufacturing of lithium iron phosphate batteries. ABAT manufactured customized mini golf carts and shuttles, e-bicycles, PLI batteries for electric buses and e-scooters fitted with unique lithium iron phosphate batteries. According to Market Wire, the batteries combined "high-energy chemistry with state-of-the-art polymer technology to overcome many of the shortcomings associated with other types of rechargeable batteries."

Market penetration

Before it was discovered to be a fraud, ABAT claimed to sell its product lines across the globe, mostly as generic and re-branded product. ABAT according to SEC filings consisted of three campuses in Harbin, China, Wuxi, China and Dongguan, China The facilities in Harbin and Dongguan manufactured small and large PLI battery cells and the facility in Wuxi, China assembled electric bikes and scooters. ABAT touted a massive $85,000,000-dollar opening of its plant in Dongguan and was hyped in United States and Chinese media at the time. A video of this event was uploaded to the YouTube Channel of Activist investor Joel Caplan who was the only American investor to attend the event. As that factory closed two years later, it was apparently yet another ruse to cover up their massive accounting fraud which went undetected by EFP Rotenberg and Joseph Bagell, the two auditors for Advanced Battery Technologies. Prior to ceasing operations once the fraud was discovered, ABAT's scooter line contained numerous models and prototypes as seen in this catalogue which were re-branded and sold under many brands such as Jinan Qingqi, Lynx, Ecobahn, Wuxi Huina and several others. ABAT's generic models such as ZQTD-690 were listed in its catalogue and displayed in its warehouses. In Spain, Wuxi scooters sold under the ABAT name through ABAT CONNECTION company in Alicante, Spain until as a gateway to the European market before dissolving. In Denmark Wuxi was re-branded as Lynx Scooters, in Russia under the Ecobahn name, in Poland under Pollana.
Other distributors and re-sellers are found in The Netherlands, Slovenia, Czech Republic, Italy, Turkey, India, Singapore to name only a few and confirmed.
During the uncertainty of whether ABAT was perpetrating a fraud on the market, another activist investor researched all of the distributors that ABAT claimed and published the report. During the years of court proceedings from 2011–2015, ABAT released several press releases claiming innocence and updates of ongoing operations while still not meeting the rules of NASDAQ or the SEC. Despite having some kind of business, ABAT did not meet the rules of NASDAQ and was delisted and subsequently after 3 years did not meet the rules of the SEC and was deregistered on 14 October 2015. $100,000,000 of capital disappeared.

Recent activities

It is now apparent that ABAT was yet another "fraud on the market. " According to the Receiver Report, ABAT's chairman Zhigou Fu suffered a heart attack during the Summer of 2016 and the company had numerous lawsuits against it in the PRC. Despite raising $100,000,000 between 2008-2011 and despite reporting massive net profits of more than $35,000,000, the company claimed insolvency to the Receiver. This enigma has never been resolved. ABAT's market cap went from $250,000,000 to zero and shareholders lost everything who held their shares that relied on Mr. Zhigou Fu's letters to the shareholders which turned out to be nothing but empty promises. Apparently, Advanced Battery Technologies never was making the $35,000,000 in net profit they claimed as once the capital from investors stopped, the company was unable to function on its own without further capital and was apparently insolvent. This was yet another case of China stock fraud. So far the principles and masterminds behind this huge "financially engineered stock scheme" remain at large.. Shareholders were victims of international theft and the Receiver is unable to do anything as US Judgements are not enforceable in China. The Wall Street Journal estimates that over 1 billion dollars of US capital was lost in Chinese Reverse Mergers such as ABAT. US laws have not changed and the US economy and US investors remain at risk with any investments in China.
According to Judge McMahon, the Chinese are not honest or transparent when it comes to business dealing in the United States and companies such as ABAT were merely vehicles to gain access to US markets and then disappear. Many of the press releases of ABAT from 2007-2014 can now be seen as complete lies and exaggerations given that ABAT disappeared and did not live up to any of its promises to shareholders to get current with their financials. Furthermore, ABAT's claim to have opened an $85,000,000 battery facility was yet another total exaggeration which attempted to cover up ABAT's gross misrepresentation of its financial picture. All the SEC reports and press releases were signed by Mr. Zhigou Fu who suffered a heart attack in late Summer of 2016. Mr. Zhigou Fu's current situation is not known as he has not communicated with the shareholders in 3 years.
In December 2011 ABAT opened a state-of-the-art battery facility in Dongguan claiming in numerous Press Releases that the facility cost 83 million and would generate about 25 million in net profit per year. The amount spent to buy and renovate the facility and purchase equipment was claimed to be 83 million dollars but that number was not verifiable. Given that the company is insolvent and taken over by the Chinese government it appears that that number was an "absolutely absurd exaggeration."
In 2015, the Delaware Chancery Court appointed a Receiver over ABAT prompted by its failure to provide books and records to shareholders to value their shares. The company was determined to be in Contempt of Court and a Receiver with broad, global powers was appointed by the Judge in Delaware. The Receiver, Robert W. Seiden, a lawyer and former prosecutor from New York, was appointed by Vice Chancellor Master LeGrow to bring ABAT into compliance with the courts orders. Currently, Vice-Chancellor Montgomery Reeves is overseeing the case. The Receiver met with Mr. Fu and his CFO in the US and China, and visited the facilities of ABAT and determined that the company was essentially insolvent.
The Receiver seized chairman Fu's US residence in Queens, New York in July 2016 in the case filed in state Supreme Court entitled Robert W Seiden Receiver for Advanced Battery Technologies Inc. - v. - Zhiguo Fu et al. The Receiver and Zhigiou Fu eventually reached a settlement and signed a final settlement agreement that results in a payment to the Receiver of approximately US$2 million.
While this Settlement agreement required that the payment be received in 4 months time, due to bureaucracy issues in the PRC, the full amount was not received for nearly 15 months. The total value of the settlement was approximately 35 cents/share on a $27.50 put-option from the Court. After lawyer fees were distributed, the shareholders received less than 10 cents/share after a 7-year ordeal. True and correct accounting was never verified and nearly $100,000,000 went missing. According to activist Shareholder Joel Caplan in Court Transcripts dating back to 2013, this was part of "ongoing systemic and formulaic "fraud on the market" committed by unknown bad actors who benefit from lax oversight by the SEC and books and records that are protected by Chinese state-secrecy laws.
The following is a direct excerpt from the Court Transcript:
MR. CAPLAN: Right. And it is compounded by the fact that this is happening with a large number of Chinese companies. So when that number $225 million is multiplied by 10 or 20, it is a huge amount of money that is leaving the country, and there is no recourse.
THE COURT: It is interesting, because if what you are talking about is a widespread phenomenon that is detrimental to the United States economy, it ought to be of interest to someone at some level of government. A Court of Law dealing with a discrete situation is probably not the best forum for working out the policy issue of whether, I don't know, Chinese companies ought to be able to distribute stock in the United States. It might be an issue of interest to the business press if there is in fact this broad-based, widespread phenomenon happening, over and over again, these companies are turning out to go bust, and all the investment from the United States ends up in China and there is no return. I would think that somebody from Bloomberg or the Wall Street Journal would be very interested in that".
The Receiver filed a motion with the Delaware Chancery court seeking final court approval for the settlement in early December 2016. Advanced Battery Technologies was de-listed as publicly traded on 30 December 2015, because the company failed to remain current in its SEC required financial filings, such as forms Q and K. Seeking Alpha went so far as to call the stock defunct, and there has been no evidence that the company still exists since 2015.
An article in the online magazine Penny Stocks Weekly in May 2016 provided the most current information available about the company's stock at that time. The article said, "This company does not file any reports and therefore there is no way to verify the number of shares that are outstanding. This means that the value of any shares held is in question, and once said value is realized, it tends to be worthless more often than it is worth more. Another investor blog commented "Given the lack of available information, any further analysis of this company's share structure would be meaningless."

Allegations of fraud

In March 2011 anonymous bloggers who, by their own admission, stood to gain if ABAT's stock price declined, accused the company of fraudulently misrepresenting its business interests – pointing out discrepancies between Advanced Battery Technologies filings with the Securities and Exchange Commission and China's State Administration of Industry and Commerce, while also questioning the reliability of distributor relationships and related party transactions. Multiple articles followed in financial opinion and analysis sites. While no fraud was ever proved, and a formal rebuttal was issued, the company failed to file its third quarter 2011 financial statements and was subsequently de-listed from trading on the NASDAQ exchange.
Advanced Battery made only one formal response to the allegations against it. The Class Action suits against ABAT are being heard in the Southern District Court of New York by the Honorable Judge Colleen McMahon. Motions to dismiss the case on inadequate substance to the plaintiffs allegations have been filed by Advanced Battery and its 2 accounting firms EFP Rotenberg and Friedman/Bagell. According to Pacer.gov under case # 1:11-cv-02279 in October 2012, a "Settlement in Principle" was achieved between the parties. In late April 2013, a "Stipulation of Settlement Letter" was submitted by Pomerantz Law Firm to settle the case for $275,000 as long as ABAT will meet certain contingencies or show good faith to do so by mid-June 2013. According to the docket, on 7/18/2013, under Docket 106, Judge McMahon denied the Plaintiffs motion for leave to file a second amended complaint. Then on 7/30/2013, as a result of the parties failure to make a motion to certify a class and due to the pending settlement, Judge McMahon struck the motion under Docket entry 94 from the record without prejudice. Subsequently, on 8/19/2013, under Docket entry 108 the Plaintiffs appealed the previous decision of Docket 106 to the US Court of Appeals which is available to read under Court of Appeals Docket #: 13–3173. On 9/12/2013, under Docket entry 110, "The Court is putting this action on an expedited trial schedule. The parties must be ready for trial by 1 December 2013. All discovery must be complete by 15 November 2013. Depositions and document productions may be taken on three days' notice. The parties must apprise the Court of any discovery disputes within 24 hours so that they may be referred to Magistrate Judge Debra Freeman. No extensions will be granted. Should all of the conditions for settlement be met in the interim, the Court will entertain a motion for approval of that settlement."
On 26 March 2014, the Class Action case 1:11-cv-02279 against ABAT was settled for $275,000 with $115,000 going to expenses and the rest to be divided up between the class which is estimated to be between 1000-1500 people. On 26 March 2014, Pomerantz made a motion to end the appeal against ABAT's auditors which was accepted by the Court. Judge McMahon ordered that the case be removed from her docket on 24 March 2014. Shortly after that as a result of ABAT not resuming their required filings with the SEC and due to a lack of required shareholder meetings, a group of shareholders raised an additional complaint against the company in the Delaware Court of Chancery where ABAT was incorporated.