(Yicai Global) March 18 -- Ping An Securities, the brokerage arm of Chinese insurance giant Ping An Insurance Group, will not be allowed to underwrite any initial public offerings for the next three months due to its role in the 2010 listing of Leshi Internet Information and Technology, which has since been found guilty of financial fraud, Yicai Global has learned.

Ping An Securities has been told by the Shenzhen bureau of the China Securities Regulatory Commission that it will not be able to sponsor any listings for the next three months, the firm told Yicai Global yesterday. The Shenzhen-based company currently has seven IPOs under review, according to the mainland bourses’ websites.

And Zhong De Securities, which underwrote Leshi’s private placement in 2015, was fined CNY11.2 million (USD1.8 million) yesterday, twice its estimated revenue of CNY5.6 million, the CSRC said.

Leshi, a struggling company once known as China’s Netflix, was found guilty in September 2020 of cooking the books of every annual report from 2007 to 2016 and was fined CNY240.6 million (USD37.8 billion) by the securities regulator, equivalent to 5 percent of the amount raised in the IPO, and the country’s biggest-ever financial penalty for stock fraud.

The statements for the years 2007 to 2009 were used in its listing prospectus on the Shenzhen Stock Exchange’s Nasdaq-style ChiNext board, of which Ping An Securities was a sponsor. The Beijing-based company declared at the time that it had net profit of CNY14.6 million (USD2.3 million) in 2007 and CNY44.1 million in 2009. Yet, it was later discovered that the company had inflated its profit for 2007 by 59 percent and more than doubled that for 2008 and 2009.

Leshi was kicked off the ChiNext board in July 2020, with a closing price of CNY0.18 (USD0.02) and a market capitalization of CNY718 million (USD113 million), less than 1 percent of its peak valuation of CNY170 billion (USD26.7 billion).

Leshi has been dragged through the mud by its founder, serial entrepreneur Jia Yueting, who borrowed heavily in its name to diversify into new energy vehicles and other ventures that have soured. Jia fled China for the US in 2017 to escape his mounting debts. He pledged to repay all creditors but the dispute rumbles on.

Editor: Kim Taylor