Silvercorp Responds (Again) To Latest Alfred Little Accusations Of Fraud

Tyler Durden's picture

Looks like the Silvercorp story is not going away any time soon. Just released by Rui Feng, SVM's CEO and Chairman, is the latest hastily written (with some glaring typos) refutation of today's allegations by Alfred Little (and the "short industry" in general apparently) that the Chinese company is merely another fraud. This is hardly the last word in this ongoing fiasco, and we fully expect Muddy Waters to get involved as well.

Just released by Silvercorp:

Dear Shareholders,

Over the last two weeks, Silvercorp has been attacked by a group of well-organized and well planned illegal short sellers trying to profit by manipulating Silvercorp's share price with false and selective statements, fabrications and rumors.

On September 1, 2011, the Company was forwarded a copy of an anonymous letter ("Anonymous Letter V1") dated August 29, 2011, maliciously alleging a "Potential $1.3 Billion Accounting Fraud at Silvercorp". On September 13, 2011, a second set of anonymous allegations against the Company was published on the internet "" ("Alfred Little Report"). On September 14, 2011, the Anonymous Letter V1 writers ("Anonymous Shorters") posted their much shorter and tone-downed version on the internet "" ("Anonymous Letter V2"). It was also couriered to Silvercorp on September 15, 2011.

These allegations and rumors have caused loss and concern among our investors and employees and to the financial market as a whole. Silvercorp has responded by issuing news releases (September 2 and 14, 2011) pro-actively and with the utmost of transparency with respect to the facts.

The attack on Silvercorp started on June 3, 2011. On that date, short interest in Silvercorp share increased by 2 to 3 folds. Shortly thereafter, a false "Alert" warning that Silvercorp would miss its quarterly revenue was mysteriously and wrongly issued by an undiscovered third party through Reuters and subsequently withdrawn by Reuters on June 6, 2011. In fact, on July 14, 2011, Silvercorp announced a quarterly revenue increase of 90%.

Who are these people who fabricate Anonymous Letters and postings on untraceable internet sites like ""?

They are nefarious short sellers utilizing the internet, fictitious names, and distributing false allegations with no, or false return addresses. These individuals are taking advantage of shortcomings in the regulatory environment and orchestrating "Short and Distort" or "Reverse Pump and Dump" schemes to their benefit.

We regret having to respond to these anonymous short sellers who have refused the regulator's request for them to come forward. They avoid liability or accountability for spreading false statements, defaming the company and engaging in market manipulation. Having said that, should there be any doubt about Sivercorp as a result of allegations, particularly those in the fictitious Alfred Little posting and the Anonymous Letters V1 & V2, a detailed rebuttal will be posted on our website today.

Silvercorp will vigorously pursue all legal actions to protect our shareholders' value. We thank our shareholders for their loyalty. We regret that they have unfairly suffered as a result of this short attack, and we remind them that they need to make sure that they are in full control of the economic benefits of their ownership in our Company and should discuss this with their broker.

1. Who are Alfred Little and anonymous Shorters?

To date, Alfred Little and the anonymous shorters have not been identified. As such, they avoid legal responsibility for the rumors and fabrications that have been circulated. Is there any credibility to the International Financial Research & Analysis Group ("IFRA"), hired by Alfred Little or hedge funds, to fabricate rumors on Silvercorp? We determined that IFRA is an organization with no registration and no address? The IFRA's Dino Huang also has no clearly defined credentials.

Anonymous Shorters and Alfred Little have not contacted Silvercorp or visited our site as many other responsible analysts and investors have done. No opportunity was given to Silvercorp to answer allegations before they were made. Those analysts that have engaged Silvercorp have determined that it is a substantial company, with real earnings, and a considerable pipeline of growth projects.

Anonymous Shorters and Alfred Little and others members of the short industry who are assisting clandestinely are promoting a distorted form of discrimination against companies with operations in China. There is a growing pattern of attacking Chinese companies with manipulative schemes, but the results have been mixed.

In case of Spreadtrum Communications, Inc., short sellers shorted SPRD first, then issued misleading reports and drove down share price to $9. But they were proved wrong as the stock is now at $20.

In case of Harbin Electric, Inc., short sellers spread rumors and false information and drove down HRBN from US$20 to US$6. At present, Harbin is in the process of completing a going private transaction at $24 per share in cash, advised by Goldman Sachs, Morgan Stanley and Lazard Freres & Co. Harbin has been on the NASDAQ's Reg. SHO list for the last 70 days, indicating naked short sellers have failed to deliver shares on settlement dates in blatant violation of U.S. securities laws.

Other examples include, Deer Consumer Products, which issued a news release on September 6, 2011 about their progress in holding short sellers accountable:


 "On August 29, 2011, the New York Supreme Court granted Deer's motion to
 serve "Alfred Little" with the summons and complaint in the New York
 Litigation by e-mail and "Alfred Little" was served the following day. A
 default judgment may be granted against "Alfred Little" if this defendant
 does not show up in court. Deer is represented by highly credible and
 competent legal counsel against the short seller defendants."

Deer also has court permission to serve document subpoenas on various parties related to the lawsuit to identify the anonymous defendants and Deer will conduct all necessary inquiries relating to the apparent stock manipulation scheme against it. We look forward to co-operating with Deer, and all other victims of Alfred Little.

According to a news release by DEER on September 16, 2011; "Alfred Little" offered to issue retractions of various articles in exchange for Deer dropping its ongoing subpoena and discovery efforts in the Superior Court of the State of New York".

2. Alfred Little and Anonymous Shorters are not entities registered or approved by the SEC, OSC, or BCSC?

We note that the short seller publications by Alfred Little and the Anonymous Shorters, involve recommendation of securities traded in the United States and Canada. Alfred Little and the Anonymous Shorters are not however entities registered with or approved by the SEC, FINRA or any other regulatory authorities in Canada. They are unknown individuals without any regulatory validation of their qualifications. They are providing recommendations without any means to check their records or identify any conflicts of interest.

3. Basic Rule and Regulations Silvercorp Follows

Technical reporting for mining companies listed in Canada is governed by National Instrument 43-101 or NI43-101. According to NI43-101, only a Qualified Person ("QP") (an engineer or geologist belonging to a professional engineering or geologist association of a province) can sign off on assaying results, resource calculations, and a technical report. A QP can be independent or non -independent (company QP).

National Instrument 43-101 - Standards of Disclosure for Mineral Projects, states in Section 5.2(2) "A technical report required to be filed by a producing issuer under paragraph (c) of subsection (1) is not required to be prepared by or under the supervision of an independent qualified person."

According to this regulation, since Silvercorp is a producing issuer, its resource or technical reports or assay results are not required to be prepared by or under the supervision of an independent QP. That means Silvercorp's own QPs, such as Myles Gao P. Geo. can prepare all the technical reports and assays. In order to give investors comfort, Silvercorp has actually exceeded 43-101requirements by retaining independent QPs to prepare all its technical reports before these allegations arose.

As Silvercorp's subsidiary, Henan Found is a private company operating in China, it complies with the regulations, requirements and standards of China, which are completely different from those in NI43-101 and those in Canada or USA. It is unprofessional to simply compare these two sets of data, like Anonymous Shorters and Alfred Little have done. In Canada, when this kind of comparison is done, it is usually done by a QP, not by unqualified anonymous authors.

Financial reporting for mining companies listed in Canada and the United States are required to be audited independently by a charted accountant (CA). Ernst & Young, has been Silvercorp's auditor since 2006. All of Silvercorp's financial statements filed on SEDAR have been reviewed by Silvercorp's audit committee which is made up of independent directors and have been independently audited by Ernst & Young. Every quarter, and at year end, myself and our CFO, certify, among other things, that our financial statements contain no misrepresentations. We are putting our names forward and are willing to be held responsible.

Again, Henan Found follows China accounting rules and tax rules. It is not possible to simply match financial statement with US or Canada GAAP. A detailed reconciliation is usually done and verified by a firm like Ernst & Young.

4. Source Of Information And Qualification For Alfredlittle's Report And Allegation

Anonymous Shorters and Alfred Little have made accusations that Silvercorp's information is not reliable or not independent. Our disclosed technical reports are above the NI43-101 standard requirement, having been prepared by independent QPs, and our financial statements were audited by Ernst & Yong.

What is the accuracy and reliability of Anonymous Shorters and Alfred Little's data? They said in their letters or report, they "believe all the information is accurate and sources quoted are reliable", but who are they? How can they demonstrate that? Why should we trust an anonymous person with a vested interest? The main source quoted, IFRA, only has a phone number and email, but is not a registered Company in Hong Kong as it claims on its website.

Who is Dino Huang, the author who prepared Alfred Little's research report and has purportedly sampled our ores "dropped" from a truck? We doubt that Mr. Huang is a QP, a CPA, a CA, or an analyst belonging to any professional association in China or any Country. What are his credentials to analyze Silvercorp from financial to mining and to geological results? If Alfred Little does not provide IFRA or Huang's credentials and certifications, then what degree of credibility can their reports have?

In the Anonymous Shorters Anonymous Letter V1, they state that "financial data from the Chinese State Administration of Industry and Commerce (SAIC) shows Silvercorp actually has a consolidated loss of US$0.5 million. In their later, tone-downed version, Anonymous Letter V2, they kept using this distortion, even after we proved it false in our September 2, 2011 news release.

Our lawyers in China were informed that the calendar 2010 financial statements are not available for ANY company from SAIC other than those summary data as we have shown in the Attachment A of our September 2, 2011 news release, as the SAIC has not completed or archived such material yet. The only information available for sale is dated prior to the calendar 2010 year. This fact further evidences that the Anonymous Letter V1 and V2 were pure fabrications and all reference to 2010 financial statements were false.

One thing we may give Alfred Little credit for is that when the Global and Mail interviewed one of the authors, Dino Huang, he said that "we never said in the report that the company was a scam, or cooked its books". This directly contradicts the Anonymous Shorters accusation that there was accounting fraud.

5. Anonymous Shorters Dramatically Toned Down its Anonymous Letter V2 from V1 after we issued our September 2, 2011 News Release

The Anonymous Letter V2 by Anonymous Shorters is dramatically toned down from the scurrilous allegations made against the Company in Anonymous Letter V1. For example while the title of the first Anonymous Letter read "Potential $1.3 Billion Accounting Fraud at Silvercorp: Proof Silvercorp Is Just Another China Fraud" the New Anonymous Letter's title reads "Our Questions About Silvercorp". However, the New Anonymous Letter still contains fabricated, false, selective, ignorant statements, and rumors. The Company refutes all substance of the Anonymous Letters V1 and V2 and the Company contends that these nefarious allegations are continuing to be posted on the internet in furtherance of concerted efforts by this group of short sellers to drive down the Company's share price. All such allegations are being forwarded to regulatory and law enforcement authorities.

6. There Are Significant Differences Between the Anonymous Letters V1 and V2?

a. The main allegation of mismatched SAIC filings (report profit in North America, while a loss is reported in China) was removed from the front page of the Anonymous Letter V2. The allegation was softened as follows: "There is a significant difference between the SAIC financials cited by Silvercorp in its September 2nd press release and the SAIC financials we initially obtained for calendar 2010, particularly as it relates to the key subsidiary Henan Found Mining Co. Ltd." The authors admit they are in possession of two versions of SAIC filings for calendar 2010, and one version corroborates the Silvercorp's figures. As they would not profit from the confirmed numbers they chose to report on the false lower numbers. The Company notes that the authors of the Anonymous Letter V2 are still referring to allegations in the Anonymous Letter which Silvercorp has demonstrated to be pure fabrication.

b. The Anonymous Letter V1 suggested that Silvercorp only has US$7.0 million of cash on hand while in Anonymous Letter V2 the authors now acknowledge that Silvercorp has US$87 million but state that "we remain, at this time, unconvinced that the Chinese cash balances are present in full, or 2) if present, unencumbered by liens." The Company notes that the authors do not provide any information to substantiate this false accusation which the Company contends is in keeping with the fraudulent actions of the authors. The Company has posted its bank statements online, and its bank balances have been audited by a top international accounting firm.

c. The Anonymous Letter states "The grade of the deposits is simply "to good to be true" compared to comparable companies. The 43-101 resource on shaky foundations." The Anonymous Letter V2 completely alters the tone of the Anonymous Letter V1 and states "we do not suggest that any independent person associated with that report has knowingly acted in an inappropriate manner". The authors now further suggest that additional confidence in the SVM investment case could be built if SVM were to hire a "name brand" minerals consulting firm and have independent, on-site work conducted every time a technical report is prepared.

Silvercorp notes that in accordance with rule 5.2 (2) of NI 43-101, it is not required to have a technical report filed by an independent qualified person as Silvercorp is deemed to be a producing issuer. The Company, having retained two independent qualified persons to prepare its reports, has already exceeded its regulatory requirements.

d. The authors are no longer falsely asserting that SVM was a reverse takeover.

e. The authors have removed reference to the statement "Suspicious Press Release (June 9, 2011) One Week after SinoForest Collapse" and to a "Suspicious Management TV Interview in Wake of Sino-Forest"'. They have also removed their assertion that they used government-trained experts in lie detection whose identity they promised to protect.

In summary from all of our news release, TV and radio interviews, public presentations, and phone communications:


--  We have dealt with the allegations made about Silvercorp. Detailed,
    complete and accurate information that refutes all of the allegations
    made about Silvercorp is public and available on our web site; and
--  An independent committee of our Board, lawyers, KPMG and regulatory
    authorities are looking into the anonymous reports and allegations made
    about Silvercorp. We are confident that they will determine that
    Silvercorp has been targeted unfairly.

Thank you for all your understanding and support. Silvercorp will weather through this storm and emerge as a stronger company!

Rui Feng (Ph. D.), Chairman and CEO

Silvercorp Metals Inc.

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tmosley's picture

Question:  If SVM is really a fraud, why are they buying back their stock?  Have any other fraudulent companies engaged in such behavior before?

Tyler Durden's picture

Short answer is yes on several occasions.

slow_roast's picture

Insider buying would make an easy way to later claim naivete about any scandal, but this vehement denial coupled with point-for-point rebuttals takes it to the next degree definitely which I'd have to think lessens the chance that this is a scam.  At some point the SEC "has to" step in and take part in the search for the anonymous short sellers.

notadouche's picture

Since when has the SEC been able to sniff out a scam?

JW n FL's picture



Keiser Report

Silver Corp CEO is gonna Die Fighting! whoever is telling the truth? Oops! I mean sending phoney (real{ish}) documents to everyone! LOL!!

Notice all the hot air and NO!! release of information??

I did.


slow_roast's picture

Who said anything about the SEC sniffing out a scam?  Someone short-selling, not naked, the stock is leaving a paper trail.  The anonymity of these letters will have a name that likely correlates to the short-seller who is leaving a paper trail along the way. 

notadouche's picture

I suppose no one but why would the SEC give a damned about the identity of the short seller but not the validity of their ascertions?  I would think it more important for the SEC to fact check the information put forth and less concerned about the source.  The identity is only important if they are acting in a fradulent manner.   The sniffing out of a scam is the natural result.  The scammer either being the corporation or the short seller.  

you enjoy myself's picture

its not only insider buying, its the company itself buying back shares. 

Captain Benny's picture

Why not publish the timeline Tyler?  I submitted it twice over the weekend.  Its a great summarization.

SeverinSlade's picture


You have yet to answer any of my questions and continue to give these reports the illusion of credibility.

So I'll ask again.


1. So far, and Mr. Anonymous refuse to comment on high grade ore going directly from the mines to the smelter.

2. The silver content has been "verified" by two men standing on the side of the road, picking up dust and pebbles and taking to a lab to be analyzed.  First off, all of the ore bound for the mill should be expected to be of lower silver concentration as it does not include the high grade ore mentioned in the previous question.  Second this analysis cannot be considered credible due to the extremely low sample size.  Had these reports been based on analyzing tons and tons of ore then it'd be somewhat valid.

3. If the company is actively engaging in fraud why have they paid out taxes to the Chinese government that are consistent with their reported revenues and silver production?

4. The Canadian authorities have asked and Mr. Anonymous to come forward and participate in the ongoing investigation.  To date, no one has stepped forward.

5. All of these reports have been leaked anonymously and all contact information is being shadowed by a proxy. 

6. If the authors behind these reports are in fact credible why do they continue to lurk in the shadows?"

If SVM is actively engaged in fraudulent activity they successfully managed to dupe just about every credible analyst in the silver mining industry.

Also if Dr. Fein of SVM is running a fraudulent company I feel sorry for him as he is a very stupid individual.  Nothing like throwing away your own personal wealth on shares of your company that are essentially worthless (especially considering that he will soon be out of a job and in jail assuming these allegations are 100 percent true).

SheepDog-One's picture

LMAO at #2, funniest thing Ive ever read!

Pretty much sums up the whole world economy right now, all market activity based upon a 3rd party overhearing something from a phone call, rumor of the contents from an inter office email, etc.

gmrpeabody's picture

I've established my investing strategy by standing along side I-5 and sampling litter gathered of late. Fewer bottles of good spirits coupled with an increase in cheap domestic wines. Not to mention that wrappers from the dollar menu are many times that of the $7 Carl's Junior variety.

Results of this study and analysis are beyond dispute. Place your bets accordingly.

Pegasus Muse's picture

Two interviews worth hearing:  


Silver Stocks - Fraud or Manipulation? Expert panel discussion: Dr. Keith Barron, Dr. Leanne Baker, David Morgan, Chen Lin, and David Bond

In a special broadcast, Jim is joined by famed exploration geologist Dr. Keith Barron, Dr. Leanne Baker, Managing Director of Investor Resources LLC, silver expert David Morgan of the Stone Investment Group, analyst and metals newsletter editor Chen Lin, and silver expert and editor of David Bond to discuss recent fraud allegations against several silver companies, particularly Silvercorp Metals. 


Silvercorp Responds to Allegations In-Depth Interview with Lorne Waldman of Silvercorp Metals Inc., as well as Robert Archer of Great Panther and Jason Reid of Gold Resource Corp.  

FranSix's picture

Wow, hey thanks for point out all the swindlers!11  (kidding)

Tyler Durden's picture

As said, we fully expect more revelations in this ongoing saga. That said, Sino Forest duped all of Wall Street and many of the biggest institutional buyers for years, with the management team having the same up/downside only to end up being a complete scam.

We believe it is up to readers to educate themselves of the facts on either side of the story than to be left like Paulson holding a worthless bag for lack of doing any contrarian diligence.

Either way, we have absolutely no interest in either side of this story and just present the news as they come out.

That said we do find it amusing that so many precious metal fans who bash "paper" commodities all day long in favor of physical are so staunchly supporting precisely a paper representation of bullion.

SeverinSlade's picture

Interesting that Zerohedge remained silent from September 2nd, 2011 to September 18, 2011.  Guess the initial reports weren't newsworthy. 

SeverinSlade's picture

You just said you were only reporting the news and had no vested interest in either side.

So by that basis ZH should have reported the news when it became news back on Sept 2nd...

The news ZH has reported today is still "incomplete", as the allegations are pretty much identical to the ones made last week. 

Tyler Durden's picture

"Alfred Little has come out with its full report on Silvercorp this morning"

SeverinSlade's picture

Okay, okay, point made.

Guess this is the full report until Alfredlittle releases "new information."  lol.

JW n FL's picture



Keiser Report

Silver Corp CEO is gonna Die Fighting! whoever is telling the truth? Oops! I mean sending phoney (real{ish}) documents to everyone! LOL!!

Notice all the hot air and NO!! release of information??

I did.

GeneMarchbanks's picture

Now that last paragraph is just plain cruel, and if I may add, pretty funny.

bigdumbnugly's picture

yeah?  you don't think people here that invested in SVM don't know it's a mining company and not some bogus etf like slv?

maybe you don't but it's apples and oranges.

tmosley's picture

The thought in the community is not that paper is "untouchable" or "evil", but rather that it is more vulnerable to manipulation, and in the cases of miners, nationalization.  If China was talking about nationalizing SVM, then the physicalbugs would be saying "I told you so".  The thought that the company itself is fraudulent has not been examined (to my knowledge) by anyone within the community, until very recently.

jekyll island's picture

That's a bridge too far, IMO. Last time I checked, bullion did not have management or counterparty risks.  SVM does not represent bullion, it represents a mining company that happens to produce silver.  I'm kind of embarrassed to have to explain this to you.  Perhaps you were thinking of SLV or GLD as paper proxies to physical metal.  SilverCorp is a legitimate company that is currently being attacked by short sellers, nothing more.  It is not the same as buying GLD and expecting that physical bullion is backstopping your position. 

oddjob's picture

Dr fein can go on buying as SVM is a fully diluted whore with more than 175,000,000 S/O. The recent PP of 10,000,000 shares at 12.70 was the payoff. Hell, any buybacks here are like pissing in the wind.

Ay Caramba's picture

Should we assume by your snarky "typos" comment that you are on the side of AlfredLittle?  If so, please just come out and say so. I've gotten a lot out of ZH in the past, and frankly haven't known that much about many of the events on which you were reporting.  However, I've been following the Silvercorp news for the past few weeks and find the evidence supporting the company far more credible than the accusations provided by the short-sellers.

Your recent postings on Silvercorp appear to be in support of the short-sellers (i.e., posting the latest AlfredLittle posting without comment, and giving the CEO's open letter a negative editorial spin). If so, some justification of your position would be welcome here.  Do you have a knee-jerk reaction against companies who do business in China?  Do you assume that short-sellers like Muddy Waters are always in the right (note that Carson Block has yet to release any justification of his short position).

You're obviously bewildering a lot of your readers here; it would be nice if you'd give us some idea of why you seem to be grinding an ax against Silvercorp. 

Tyler Durden's picture

A: there are no sides here. B: Any bewildered readers are surely thankful for this gift to buy up SVM stock at prices that are cheaper than "fair value" due to the media frenzy surrounding the company. Or is that incorrect?

Fanatic's picture

What about the possibility of existing shareholders with leverage being ruined by forced liquidation due to an artificial decline caused by manipulators, if the company is not a fraud?

GeneMarchbanks's picture

Tough tities, pal. No guarantees in life is there?

Smiddywesson's picture

If someone invested enough in one mining stock to ruin them, they have to admit they made a mistake.  The same goes for excessive leverage, or for holding a losing trade beyone one's stop, if indeed they even had a stop.

There's always an excuse why it's someone else's fault. 

The only person who can ruin you, is you.

DonnieD's picture

If an investor gets ruined by one leveraged position, then they probably deserve it. 

Who knows if this thing is a fraud. I doubt anyone posting here has a clue.

Spitzer's picture

I dumped half my position in Eldorado when Carson Block peeped. It is effecting the whole sector. Maybe its a ploy to keep silver and the miners down.

FranSix's picture

You would have to include the miners in the market, they're not seperate.

notadouche's picture

That is the smartest statement I've heard yet.  I suppose that's why you run the site.  It's amazing how money or the loss thereof makes common sense go right out the window.   If you believe the company back up the truck.  If not get the hell away.  It will resolve itself the way it's supposed to no matter what either side says.  Facts, at some point always surface.  It's an S company either way, Silver or Shit, place your bets.

Not that you needed my affirmation Mr. Durden.


bigkahuna's picture

The truck has backed up and the on-loading has commenced.

bigdumbnugly's picture


when you get through wiping off the dingleberries from your chin and gargling after ass kissing tyler maybe you'll think through what you said.

legit companies can be taken down bt large coordinated attacks by shorts.  if they are too small to defend themselves successfully and the supposed "watchdogs" continue to jerk off to porn while it all goes down, then good honest companies and their shareholders can be laid to waste.  facts don't always come to the surface as early as they should and today internet news and rumors of news rule the day.

will it matter that so many respected people in the field (as evidenced by the financialsense interview) who know 50 times more about mining than does anyone here (including tyler and carson block if he's pailing around) believe in SVM and their claims?  and what more can a shareholder go by than official records and the opinion of expertts in the field?

it's easy to say "back up the truck if you believe in the company."  it's no harder than to tell you to walk out in front of that speeding bus because there's a stop sign there to protect you.

shorting at that level whether justly or not can undo normal buying activity, thus causing the shareprice to destabilize.





FranSix's picture

Ok, so if a pattern is forming here, then LSG.TO, Lakeshore Gold used to be owned by Hochschild who sold their stake, now they are under fire from analysts about their earnings.

Secondly, Goldcorp. used to own Osisko and sold their stake, much to the surprise and consternation of everybody concerned.  So Osisko is going to run into the same problems, I'd bet.

So any company that runs into shorting problems or production numbers don't match up, and have had participation from the bigger operators are therefore takeover targets.  The Silvercorp CEO aught to issue a poison pill.

notadouche's picture

You must own a ton of shares and getting hammered as I see no need in taking personal shots.  It's not personal Sonny, it's just business.  If SVM has the cash and quality silver and reserves they claim in the end SVM will survive and thrive.  Individuals may be wiped out for betting too heavily and can't handle the short term drop or just flat out panic but if this company's mines and financials are on the up and up, and I for happen to believe they are then they will either weather the storm or get bought by a larger mining company that see's the smarts in adding quality reserves on the cheap.  If the company is well capitalized and has the silver it claims then hang on and watch the mother of all short squeezes.  But why lash out with such ridiculous personal attacks.  Intelligent retorts go much further to legitimizing your point than insults.   

The man said something that was so simple and loaded with common sense and I recognized it.  If he said something I didn't agree with I would've went the other way.  And this person we call Tyler doesn't know who I am, doesn't give a damned who I am or what I think so the idea of anonymously sucking up as if I gain some magical favor is too stupid for words.  


tmosley's picture

Would you or anyone else be kind enough to cite some historical precedent? 

tmosley's picture

Less ratings, more precedent citing.  Seriously, I want to know as a student of history.

bigkahuna's picture

Like when? I have not seen a fraudulent company buy it's own shares back while the COO and CEO are buying hand over fist. Fraudsters are usually all sold out by the time fraud comes to the surface. I cannot think of people like bernie ebbers or dick fuld on massive buying rampages just before their dicks hit the dirt. 


Can someone give a good template to base any allegations of fraud where the company's treasury along with officers went mad buying the stock? 

tmosley's picture

So the officers are buying stock too?  Is this documented, or are they just claiming publically that they are buying?

jbremner's picture

Chinese Reverse Mergers just another Ponzi scheme?


A total of 94 federal securities fraud class action lawsuits were filed in the first half of 2011, a whopping 45 of those (almost half!) are related to Chinese Reverse Mergers and M&A. According to Professor Joseph Grundfest, Director of the Stanford Law School Securities Class Action Clearinghouse, “The new kid on the block is the claim alleging that Chinese-based issuers have made false financial statements. The question remains as to whether or not this litigation will lead to meaningful recovery for plaintiffs. If plaintiffs successfully obtain large judgments in American courts, they may not be able to enforce their judgments against Chinese assets held by Chinese defendants in China.”


A number of high-profile Chinese companies have recently fired their auditors, restatedearnings and owned up to lying about assets—admissions that have decimated billions of dollars in market value and harmed the value and reputations of virtually all other Chinese reverse-merger companies. Since April, the Halter USX China Index, an index of US-listed Chinese companies, indicates that stock prices have fallen more than 50 percent.


In an attempt to address the series of financial scandals of Chinese companies listed in America, US regulators flew to Beijing in July. The U.S. delegation from the Securities and Exchange Commission (SEC) and The Public Company Accounting Oversight Board (PCAOB) met with Chinese counterparts at the Ministry of Finance and the China Securities Regulatory Commission (CSRC) but failed toagree upon set of cross-border auditing standards. According to an article in Caijing Magazine, a Chinese source close to the negotiations said that the US delegation drafted a list of public companies and brokerage organizations that they wished to investigate, but the Chinese side insisted that this would breach China’s sovereignty and rejected the request.


SEC’s microcap fraud task force is gathering information and passing it along to the FBI, but even the FBI is limited in what in can do when the fraud is in another country where defendants are insulated from US judgments by geography and Chinese law. Some say the FBI should be investigating the bankers arranging the deals as 7 USinvestment banks were named in these years’ class action lawsuits, but whether that happens with any real recourse remains to be seen.


This epidemic seems to indicate that the moral hazard for investment bankers must be too much to bear. All that is required is a Chinese proxy to act as a company and anaccounting firm to make up numbers--imagine if you could IPO in the biggesteconomy, in the biggest financial markets with the biggest investors in theworld and not have any concern for legal recourse against you, your assets or cash flow! What got my attention was the money the bankers are making, it’s almost unbelievable: currently, bankers are taking up to 10% free equity (amounts unheard of by usual standards) in a Chinese company just for arranging the IPO. The lawyers and accountants also get big chunks of free equity. But wait, why is the pay so rich? Doesn’t it seem too good to be true? Ah yes, the question that everyone thinks Bernie Madoff’s money raisers should have asked, how come everybody is making so much money, isn’t there something wrong?


Well that’s the point with US-listed Chinese stocks: there is a Great Wall between the cash flow and assets, and the shell of the company that is public on the US Exchanges. So in effect there are two companies—and the company investors own shares in is the one which has no cash flow or assets attached to it. Just like a Ponzi scheme, with no substance to back up value, a share is really only worth what a subsequent investor will pay. Just don’t be the last guy holding the stock because you don’t own anything tangible, anything with legal recourse, and the only money you’ll get out of it is from the next sucker you sell it to.





CPL's picture

Bre-x did.  In fact go look at the directors and go look for similar names that "helped" BreX.

oddjob's picture

Southwestern Gold.

FranSix's picture

Here's the reference.  Remember the story now.  Was quite the market darling prior to revelations.  I think SVM is quite the different story, since you have a mine in production, not an exploration story.

Mines have many ways of stockpiling ore, reporting grades, stockpiling dore bars, and accounting for by product metals.  Could be also that some hedges in place are affecting the bottom line.

bigkahuna's picture

This story is not precedent. The CEO sold stock prior to the fraud allegations, then he admitted he was a fraud.