Longtop Financial, a popular Chinese software company, was exposed as a colossal fraud last year .The “cash balance” on Longtop’s balance sheet, it turned out, was fake; a fiction created by the company’s managers and helpers.
The Longtop fraud followed other China stock frauds that have made many of Wall Street’s best and brightest look like fools. It has also increased the scepticism of American investors toward Chinese companies.
Unlike some of the more famous American-company frauds in recent years , like Enron and Worldcom, it turned out that Longtop had institutional help in perpetrating its fraud. The reason Longtop was able to fend off sceptics for so long, despite multiple analysts arguing that it was a fraud, was that Chinese banks were complicit in the scam.
According to an extraordinary letter that Longtop’s auditor, Deloitte, sent the company when it quit, Longtop’s banks sent out fake statements attesting to…
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