The China Hustle


The China Hustle is a 2017 finance documentary produced by Magnolia Pictures and directed by Jed Rothstein. The documentary depicts a systematic securities fraud that continues to occur in the United States, wherein small nondescript Chinese companies with possibly links to the Chinese Communist Party, are hyped up and sold by American investment banks to U.S. based investors. Many of the film's protagonists are activist shareholders and Due diligence professionals who discovered the fraud and subsequently short-sold the toxic stock in order to bring about the collapse of the fraudulent entities.
According to , more than 200 companies have been deregistered by the SEC that has resulted in a market cap loss of over $500,000,000,000 in the ongoing, systemic and formulaic stock fraud due largely to unverifiable accounting and lack of PCAOB accounting in China due to Chinese companies being protected by State Secrecy laws of China. One outspoken shareholder activist who has been tracking the China Hustle since visiting China in 2011 is defrauded shareholder of Advanced Battery Technologies, Joel Caplan who continues his efforts to lobby Congress and the SEC to prevent further fraud from taking place until dozens of United States' Court Judgements are paid in full and until PCAOB oversight of Chinese companies is assured. His website help to support legal efforts and to aid victims of the China Hustle and raise funds for ongoing legal battles.
On July 9, 2020 after a decade of relative inaction, the SEC held a "Roundtable on Emerging Markets" with a focus on China Accounting Fraud, lack of transparency, lack of PCAOB oversight, publically traded sanctioned companies with human rights abuses and other topics that should be considered "material risks" in a publically companies propectus but which are not.
Thousands of shareholders who were defrauded in "The China Hustle" have not yet been paid on United States Court Judgements. According to Attorney Carson Block, a noted truth-teller on China Stock Frauds, the CCP

Synopsis

After the financial crisis of 2007–2008, as investment firms in the United States look for ways to improve clients' investment performance while earning money for themselves, they chance upon the idea of selling opportunities to unsuspecting Americans who want to get rich by participating in the "China growth story" but do not know much about the country or its companies. They do so by getting small nondescript Chinese companies to do reverse mergers with defunct American companies and thus get listed in the NYSE overnight. The hype that accompanies this is aided by paid guest appearances by the likes of Bill Clinton and Henry Kissinger at so called "investment conferences" organized by B level investment firms, thus adding a garb respectability and reliability. The stocks of these companies see spikes, investment firms goad their investors into buying them, siphoning off brokerages on the way. When the prices of these stocks crash to their real value, unsuspecting savers are left holding large amounts of worthless stock in their 401-Ks.
The documentary investigates the collusion that occurred from 2008 to 2016 between second and third-tier US-based Wall Street investment firms such as Roth Capital Partners and small companies based in China. Most of the companies featured in the film were listed in NYSE through reverse mergers. The film reveals that actual revenues of Chinese firms were typically one tenth of what was filed with the SEC. Subsequent to investigations, most of the firms were de-listed from the NYSE resulting in losses of billions to US investors.
Information on the frauds was published in Chinese newspapers in 2010 including the online edition of Sina, but American investors were unaware of these as the articles were mostly in Chinese. Subsequently, the small research and investment firm Muddy Waters published translations of the Sina reports but they did not receive much attention.
The film concludes with a closing sequence that highlights the continued lack of regulatory oversight in Chinese securities fraud - out of approximately 400 chinese companies, only 1 CEO in China went to jail for fraudulent reverse mergers - and alludes that Alibaba Group's and other existing Chinese firm's continuing claims of high growth rates might be just as fraudulent.

Interviews

The documentary features interviews with investment bankers, whistle blowers like Dan David who after reading reports by the due diligence firm Muddy Waters Research decided to short many hyped up penny stocks based in China. It also features interviews with journalists from Wall Street Journal and New York Times, Mitchell Nussbaum who was the lawyer from Loeb & Loeb who represented the Chinese firms featured in the film, the investment banker who sold shares and issued "buy" recommendations on these stocks to his clients and retired U.S. Army General Wesley Clark, who was chairman of Rodman & Renshaw, another firm selling these stocks and Paul Gills. The documentary shows the issues that crop up when large accounting firms like KPMG and Price Waterhouse Coopers sign off audit reports done by their affiliates in China, which may not have completely been verified, but are the system that is followed by all large accounting firms across the world.
One of the classic examples of the Reverse China Merger Fraud was Advanced Battery Technologies, CEO Zhigou Fu. ABAT raised $89,000,000 in three separate offerings through Rodman and Renshaw and at one point had a market-cap of $250,000,000. ABAT was first delisted by NASDAQ and subsequently deregistered by the SEC and the company never communicated with the shareholders again. At one point ABAT continued to make false statements and press releases declaring that they would resume their financial filings in 2014.
ABAT also released several other press releases including that they were doing a 5,000,000 share buyback. Within a year the company was deregistered by the SEC. The company is currently in Receivership in Delaware Court of Chancery under 9542-VCMR being overseen by Vice Chancellor Montgomery Reeve. The China Hustle mentions a number of other Chinese Reverse Merger Frauds like SCEI, CBEH, CCGY and CSGH. These companies collectively stole over $200,000,000. The entire matter was reported to the FBI. To date nothing has been done. New legislation has been introduced by Senator Rubio to stop the ongoing financial fraud on US markets by Chinese Nationals and a government that protects their companies from appropriate scrutiny.
See also https://www.wsj.com/articles/you-cant-trust-a-chinese-audit-11559687739
See https://www.rubio.senate.gov/public/index.cfm/2019/6/rubio-colleagues-introduce-bipartisan-bicameral-bill-to-ban-chinese-foreign-firms-that-flaunt-u-s-laws-from-u-s-exchanges

Reception

The film premiered in 2017 at the Toronto Film Fest and was released on DVD and shown at the International Finance Centre in Hong Kong in April 2018.
Rotten Tomatoes gives the film rating of 74% based on reviews from 27 critics. Mark Hughes, a contributor at Forbes called it "the most important film of the year".