The Review of Securities & Commodities Regulation
Securities Fraud Litigation Against China-Based Companies in the United States
July 17, 2013
Securities fraud litigation has frequently followed “Chinese reverse mergers” by which Chinese companies merge with U.S. shell companies and become listed on U.S. exchanges. These cases have raised issues of international service of process on individual defendants and the use and effect of Chinese-language documents. Plaintiffs have alleged large discrepancies between company filings in China and with the SEC, as well as sham operations as a basis for pleading securities fraud in some instances. The authors suggest that these cases provide useful guidance, as foreign-based companies increasingly seek access to U.S. markets and listings on domestic exchanges.