A south China court has ordered embattled Kangmei Pharmaceutical to pay around RMB 2.5 billion ($385 million) to over 50,000 investors as compensation for their losses on the company’s stock, reports Caixin. The Guangzhou Intermediate People’s Court found the drugmaker, its executives and auditors responsible for financial fraud that caused RMB 2.46 billion of losses to 52,037 investors.
The defendants include former Kangmei Chairman Ma Xingtian and his wife, former deputy general manager Qiu Xiwei and financial chief Zhuang Yiqing. The court found that they deliberately organized, plotted and implemented the financial fraud and should be 100% liable for losses to investors. An additional 13 executives were ruled partially responsible for the losses. Guangdong Zhengzhong Pearl River Accounting Firm, which acted as Kangmei’s auditor for 18 years since 2001, and its partner Yang Wenwei were also ruled 100% liable for the losses. It’s not known whether the defendants will appeal the verdict.
Kangmei, one of the country’s biggest publicly traded drugmakers, was accused of financial reporting fraud involving RMB 88.6 billion of overstatements between 2016 and 2018. It was fined RMB 600,000 in May 2020 by top securities regulators for inflating revenues and fabricating bank deposits.