Kangmei investors raise $364 million in first class action judgment

What’s new: Scandal-ridden Chinese drugmaker Kangmei Pharmaceutical Co.Ltd. (600518.SH) paid 2.46 billion yuan ($364 million) in compensation to investors, ending the country’s first securities class action lawsuit against a fraudulent issuer.

More than 52,000 Kangmei investors have received cash payments under the company’s reorganization plan, according to Li Chao, vice chairman of the China Securities Regulatory Commission (CSRC), in a briefing on Friday.

Of the investors, 99.4% are small retail investors with losses below 500,000 yuan, Li said.

The background: Kangmei, one of the largest listed drug manufacturers in China, has been accused of financial reporting fraud involving 88.6 billion yuan of overstatements between 2016 and 2018. Regulators found that the company used fake bank deposit slips to inflate its cash reserves, falsified documents for non-existent business activities and transferred company funds to related parties to exchange its own shares.

In November 2021, a court in Guangzhou issued a landmark ruling in the first securities class action lawsuitordering Kangmei to pay 2.46 billion yuan to more than 50,000 shareholders who lost money due to the fraud.

In January, My Xingtianthe former chairman of Kangmei, was sentenced to 12 years in prison and fined 1.2 million yuan for manipulation of the securities market, non-disclosure of material information and bribery.

Quick Takes are condensed versions of China-related stories for quick news that you can use.

Contact reporter Han Wei ([email protected]) and editor Bob Simonon ([email protected])

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