Web sleuthing – Part 1 – Domain registration records

Generally, key executive officers and insiders of a publicly-traded company do not register their company’s domain.  They let an IT person or web designer handle the task.  Domain registration records tend to be a reflection of what the lower-level employee thinks who actually owns a particular domain name.

Looking at domain registration records can potentially be a useful tool for detecting frauds.  Insiders may be lying about the ownership of a particular company or subsidiary.  Fraudsters may unintentionally fail to cover their tracks because many people do not realize that domain registration records are public.  The domain registration records may tell a different story than a company’s SEC filings.  That is why I look.

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The BCSC / Jon Carnes drama and its implications

A British Columbia Securities Commission (BCSC) panel dismissed fraud allegations against Jon Richard Carnes.

• The Globe and Mail (a Canadian newspaper) has an excellent in-depth article that gives “The full story of Jon Carnes, Silvercorp, and the BCSC“.
• You can read the actual decision at http://www.bcsc.bc.ca/Enforcement/Decisions/PDF/2015_BCSECCOM_187/ .  It’s interesting if you’re into short selling.
• I have tweeted about some of my thoughts on the decision over at @glennchanWordpr.

While Carnes theoretically won, the panel’s written decision was very biased against short sellers.  Firstly, the BCSC failed to realize that they went after the wrong people (this is a pattern that repeats through history with many regulators… it’s nothing new).  However, the panel did not see value in creating an environment where people can expose fraud without fear of repercussions and nasty legal bills from regulators.

More importantly, one of Carnes’ researchers (Huang Kun) was wrongfully imprisoned in a Chinese jail and suffered abuse while detained.  Money is one thing.  Having your human rights violated is another.  I believe that Carnes’ lawyer(s) presented newspaper articles that describe Kun’s story.  Exhibit EX00344 (a BCSC webpage lists the hundreds of exhibits filed) seems to be a Globe and Mail article that describes what happened to Huang Kun in China.  The panel’s written decision does not seem to mention Huang Kun at all.  His name does not appear in the decision anywhere.  I am very disturbed at what appears to be the panel white washing the abuses that have occurred.

CBPO – What their joint venture partner is saying

CBPO’s Shandong Taibang subsidiary is 82.76% owned by CBPO (image).  I believe that the rest is partially or wholly owned by the “Shandong Institute of biological products” (山东省生物制品研究所).  The Institute’s website seems to say that their joint venture with CBPO has projected revenues of $900M annually (Renminbi) and projected income of $17.24M annually.  This works out to an income margin of 1.91%.  Gurufocus.com shows that CBPO’s net income margin for YE2013 was 26.85%.  The discrepancy seems large.

(*EDIT 5/8/2015: Changed the net income margin number from 2014 to 2013.)

CBPO’s strange web presence

CBPO is a Chinese reverse merger with a market cap of $2.45B.

The WHOIS record for Ctbb.com.cn shows “山东泰邦生物制品有限公司” under the registrant name.  This translates to “Shandong Taibang Biological Products Co., Ltd.” according to Google Translate.  According to CBPO’s SEC filings, “Shandong Taibang Biological Products Co., Ltd.” is a 83.76% owned subsidiary of CBPO.  That is weird because the SEC filings suggest that CBPO is the owner of Ctbb.com.cn.  Many of the 10-Ks such as the YE2014 10-K say something to the effect of:

In addition, we had registered three domain names as of December 31, 2014, namely, http://www.chinabiologic.com, http://www.ctbb.com.cn and http://www.taibanggz.com.

So if CBPO registered ctbb.com.cn, why does the domain registration show “山东泰邦生物制品有限公司” under the registrant name?  Why is the site registered to a partially-owned subsidiary?  Is this another case of multiple personality disorder?

CNIT resolves multiple personality disorder

From the press release filed on EDGAR [emphasis mine]:

SHENZHEN, China, March 24, 2015 /PRNewswire/ — China Information Technology, Inc. (the “Company” or “CNIT”) (Nasdaq GS: CNIT), a leading provider of integrated cloud-based platform, exchange, and big data solutions to the Chinese new media industry, today announced that the Company has completed its acquisition of Shenzhen Biznest Internet Software Co. Ltd. (“Biznest”), a leading cloud computing hardware and software company in China. As previously announced, the total consideration of the transaction is approximately $15 million, consisting of approximately $7.5 million to be paid in cash and 1,543,455 ordinary shares to be issued by the Company. The transaction consideration has been fully paid by March 18, 2015 and the modification registration of Biznest with the competent administration for industry and commerce has also been completed.

Now I think that CNIT has figured out its identity as a hot cloud technology company.  And now there is no reason for me to be confused about why Biznest’s domain name registration listed a chinacnit.com email address.  (See my previous post on CNIT’s multiple personality disorder.)

*Disclosure:  No position.  I swing trade in and out of stocks.  This may be a mistake on my part… who knows.
EDIT (3/27/2015):  As of 3/27/2015.  I am short CNIT.  I may cover my position without updating my blog.

A quick comment about Chinese frauds and leaving racism at the door

The rampant fraud among Chinese reverse mergers and Chinese stocks listed on foreign exchanges has very little to do with ethnicity.  If you are a student of the game, you can figure out the ethnicities and nationalities of the people involved.  For example, many of the accomplices are American stock promoters with American citizenship.  There are also Canadians involved with the American-listed (and Canadian-listed) scams.  It’s silly to discriminate based on race or nationality.  What you really want to do is:

1. Discriminate based on integrity and track records.  People who have committed fraud in the past will likely commit fraud in the future.
2. Look at areas that would be magnets for fraud.  Legally, there is no extradition treaty between China and the US/Canada.  This means that Chinese citizens can commit egregious frauds in American stock markets with virtually no consequences.  The reverse is also true.  A quick Google search for “EB-5 scam” will reveal various ways in which Americans scam Chinese nationals through the Immigrant Investor Program.

Sino Grandness (SGX:T4B)

Sino Grandness trades on the Singapore Exchange under the symbol T4B.  VIC has a pretty good writeup on the stock: http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/128233  (You’ll need to sign up for a guest account to read it.)  While one-sided hit pieces should be read with some skepticism, the writeup raises a lot of red flags and provides some evidence that revenues are massively overstated.

If I could short Singaporean stocks I’d probably be shorting Sino Grandness.

*Disclosure:  No position because I can’t short it.