ZST Technologies

Chinese Reverse Merger Sponsor WestPark Settles Class Action Suit by ZST Shareholders

WestPark Capital and its founder Richard Rappaport have settled a class action suit brought by ZST Digital (ZSTN) shareholders who bought the stock from the Los Angeles-based investment banking firm. A judge in the U.S. District Court for the Central District of California found that ZST shareholders could sue Rappaport and litigate to hold him liable for the fraud conducted by Chinese executives of ZST during their initial public offering. WestPark and ZST agreed to the settlement in March just as another shareholder, Peter Deutsch, was winning court orders to raid ZST’s CFO home for company documents and computers. The California class action case, which was litigated for the last two years by New York-based law firm Frank & Bianco, offers participating ZST shareholders a lump sum of $1.7 million. Settlement filings by the plaintiffs lawyers estimate this is around 40 cents on the dollar.

RINO Cooked Books, SEC Says

RINO International Corp. (RINO) executives David Zou and Amy Qiu agreed to pay back $3.5 million after regulators charged them with keeping two highly divergent series of accounts and diverting funds for personal use. RINO, which provides services to China's steel industry, formed through a reverse merger with shell Innomind and Jade Mountain Corp. in 2007. The reverse merger was funded by two dozen investors who put $24.5 million into the company, according to the SEC.

ZST Technologies

Chinese Reverse Merger Investor Succeeds in Asset Hunt

A single high net worth investor is taking on a U.S. exchange traded China-based company, ZST Digital (ZSTN), whose stock went into a free-fall when the company stopped filing SEC financials in late 2011. The investor, Peter Deutsch, and his long time lawyer, David Graff, were able to get a New York federal judge to issue ex-parte orders which enabled them to raid the Brooklyn, N.Y. home of ZST's former CFO, Henry Ngan, and the offices of the U.S.-based investor relations firm Taylor Rafferty. Ngan's cell phone was seized in the raids and is in possession of a court appointed receiver. Growth Capital Investor has learned that the phone has messages on it showing in late 2011 ZST was communicating with several U.S.-based institutional firms about depressing the company’s stock price in order to make it easier for ZST’s CEO to buy it back and take the company private again. The scheme – to raise money from U.S. investors, then depress the stock by going dark on financial reporting, in order to buy it back cheap and go private – was only a theory Deutsch used in his initial motion filed in Delaware. That motion asked the Chancery Court to see the company’s books and records after CFO Ngan denied him access.

CHMO chart

Reverse Merger Company China Mobile Borrows Millions, Fizzles

Reverse merger company China Mobile Media (CHMO) ran into trouble with debt financing, according to a lender suit that says the company owes $35 million for defaulting on debt and triggering default covenants involving warrants and registration of the company's stock. Investors Abax Lotus Ltd. and Abax Nai Xin Ltd. filed the suit on Jan. 7 in the New York State Supreme Court.