(Yicai Global) May 15 -- Kangmei Pharmaceutical’s shares gained after China’s securities regulator fined the traditional Chinese medicine maker CNY600,000 (USD84,540) for a financial fraud that emerged a year ago, bringing closure to the scandal.

Shares of the Shenzhen-based company [SHA:600518] rose 4.8 percent today to close at CNY2.82 (40 US cents) each. They are still 60 percent down from a 52-week high of CNY7.07.

Kangmei Pharmaceutical announced in April last year that it had overstated its cash positions to the tune of CNY29.9 billion (USD4.21 billion). The China Securities Regulatory Commission announced the financial penalty yesterday at the same time as it slapped fines of CNY100,000 to CNY900,000 on 21 of the firm’s personnel for their involvement in the accounting scandal. The CSRC also handed down market bans on six executives ranging from 10 years to life.

The company faked a cumulative increase of CNY30 billion (USD4.2 billion) in revenue and CNY4 billion (USD563.2 million) in profit from 2016 to 2018. The firm also inflated its currency funds and fixed assets by forging or altering large fixed-term certificates of deposit and by other means. It also had an issue of shareholders’ unauthorized use of company funds, according to the CSRC.

The firm’s actual controllers are a married couple: Ma Xingtian and Xu Dongjin. They were also the subjects of a financial fraud probe at the end of 2018.

Intermediary agencies suspected of violating laws and regulations are still under administrative investigation, the CSRC said, adding that it has reported the suspected criminal acts of the company and related persons to the public prosecutor.

Shrinking Stock Price

The company's stock price almost halved from Jan. 2 to Dec. 28, causing heavy losses to investors. It had issued more than 4.4 billion shares as of Dec. 31, 2018, and had over 222,600 shareholders, public records show.

Investors who bought the stock between April 20, 2017 and Dec. 28, 2018 and sold or kept them on Dec. 29, 2018 and after have the right to bring civil suits against the company based on judicial rulings, Song Yixin, a lawyer with Shanghai Honor Law Firm, told the Securities Times.

Kangmei has not yet published its 2019 annual report, and only announced its major operating performance report for last year on April 30. The firm's operating income was CNY11.3 billion last year, down over 36 percent annually and its net profit went from negative CNY13.5 billion to minus-CNY16.5 billion in a yearly decrease of over 11-fold in the first time the company has announced performance losses since it listed on March 19, 2001.

The firm's share price has steadily tumbled from an apex of CNY27.81 in May 2018 to a trough of CNY2.56 in June since the news of its scam broke. Kangmei's stock has hovered near that nadir ever since.

Editor: Ben Armour