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goldminingXpert (28.71)

CCME: pump/dump done, lawsuits begin



February 04, 2011 – Comments (78) | RELATED TICKERS: CCME.DL , RINO.DL2

Let the lawsuits begin as the scandal winds down... I wish all of you stuck with this stock the best of luck in courts -- perhaps there's still something to recover? If you've been part of the victim class, please do join the lawsuits, they are our best hope of stamping out these violations of security law in the future, as the SEC is powerless to protect us.

Federman & Sherwood has Launched an Investigation of China MediaExpress Holdings, Inc. for Possible Violations of Federal...


The law firm of Federman & Sherwood has initiated an investigation into China MediaExpress Holdings, Inc. (NASDAQ: CCME | PowerRating) ("CCME") with respect to potential violations of federal securities laws.

It is believed that CCME has been engaging in a massive "pump" and dump" scheme, whereby it significantly inflates its earnings and revenues through a series of materially false and misleading statements and announcements in order to enrich its management. The company has also issued announcements as to its future business prospects and ventures, which have proven to be false.

If you purchased common stock in China MediaExpress Holdings, Inc. between March 31, 2009 and February 1, 2011, and wish to discuss this action, or have any questions or concerns regarding this notice or preservation of your rights, please contact our firm. Federman & Sherwood has extensive experience representing investors in securities, derivative and merger-related shareholder class actions.



NEW YORK, Feb. 3, 2011 (GLOBE NEWSWIRE) -- The Rosen Law Firm, P.A. announces that it is investigating potential securities fraud claims against China MediaExpress Holdings, Inc. (Nasdaq:CCME) ("China MediaExpress" or the "Company") resulting from allegations that the Company may have issued materially inaccurate financial statements to the investing public between March 31, 2009 and January 31, 2011.

On January 31, 2011, analyst firm Citron Research issued a report alleging that China MediaExpress misrepresented its financial performance, business prospects, and financial condition to investors. On February 3, 2011, analyst firm Muddy Waters issued a report echoing Citron Research's allegations of fraud.

Citing a number of sources, the reports assert that the Company's revenues were substantially overstated and that the Company exaggerated the extent of its business operations. These disclosures of potential fraud concerning China MediaExpress caused the stock price to drop, damaging investors.

The Rosen Law Firm is investigating a securities class action lawsuit on behalf of China MediaExpress investors. If you purchased China MediaExpress stock between March 31, 2009 and January 31, 2011, please visit the website at for more information. You may also contact Laurence Rosen, Esq., or Jonathan Horne, Esq. of The Rosen Law Firm toll free at 866-767-3653 or via e-mail at or

The Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation.




78 Comments – Post Your Own

#1) On February 04, 2011 at 11:36 PM, HarryCaraysGhost (87.08) wrote:


Thanks to the 25% increase today I got out with a profit (not much but a profit)

I read on Caps that It was a good learning experence to keep at least one share of a stock that you sold, just to see what happens, so I guess I'm eligible for any lawsuits.

Ok I'm giving the main finger to China from now on. 

Not sure what I was thinking, the numbers just looked so good, but I had my doubts. Mistake was not pulling the sell trigger at $20.

Ugh... The hardest part of investing for me remains knowing when to sell. 

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#2) On February 05, 2011 at 12:09 AM, Valyooo (34.55) wrote:

Couldn't agree more with you Harry.  For me, finding nice entry points is easy...I usually sell too soon, but often sell far too late.  I was up 60% on DSCO like a month ago now I am down 20%

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#3) On February 05, 2011 at 1:23 AM, goldminingXpert (28.71) wrote:

Glad some of you were able to get out on the bounce. Nice when we can learn market lessons without having to pay big $$$ costs.

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#4) On February 05, 2011 at 3:32 AM, ferrariedgardo (28.70) wrote:

Let's see what these guys can proove.

Probably they'll proove they are good at getting some legal advisoryfees from people who got scared.

This will probably take long to resolve and will make shorts make some money on the  short term but will provide excelent entry points for buyers in the long term.




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#5) On February 05, 2011 at 4:43 AM, goldminingXpert (28.71) wrote:

The long-term is 0. The only question is how long it takes to get there. I'd give it 6 months.

This is not a buying opportunity ... there are no more buying opportunities for CCME, unless you are day-trading. The trick has been revealed, and the truth has been set free.

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#6) On February 05, 2011 at 8:01 AM, JaysRage (78.00) wrote:

Lawsuits on both sides.   There isn't any truth on the side of Citron or Muddy Waters.   What they have on their side is fear.  The Citron research is already proven incorrect by multiple sources.    The biggest and most obvious Muddy Waters lie (the Apple partnership) was debunked when CCME has issued a short response (on Chinese New Year, no less......the U.S. equivalent of Christmas Day), and they are going to respond with a more thorough response next week.    There is on-line evidence that the other pieces are fabricated as well. 

Here is a link to the other lawsuit.     In addition, I won't be responding to any more of your blogs.   Based on your passion on this one, rational thought is not going to be in any of your responses, and I suspect that you went in with real money on the short side.   It's possible that you make money due to fear, but truth is not on your side.    The "research" is critically flawed.   Whether it was intentional or not could be hard to prove, but it's wrong.

Now, could this take a very long time to sort out, and could the stock languish for a long time in the mean time?  You bet.  Could the company have to spend far too much of their time and energy undoing the damage of some glorified bashers?   Absolutely.    Is this a "must buy" from a short-term perspective?   Probably not.   Spare me the "truth has been set free"  speaches. 

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#7) On February 05, 2011 at 12:35 PM, goldminingXpert (28.71) wrote:

No position in the stock JaysRage. I'm just trying to save readers their money. You want to lose yours, great! Free markets, you want to invest in a near-100% proven fraud? Good for you! It's America!

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#8) On February 05, 2011 at 3:59 PM, Momentum21 (97.31) wrote:

GMX - What's with all of this bashing of CCME anyhow? Have you been drinking? : )

I am not long yet but your weak arguments for this lousy research is getting me interested...

I'm just trying to save readers their money



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#9) On February 05, 2011 at 4:38 PM, HarryCaraysGhost (87.08) wrote:



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#10) On February 05, 2011 at 5:13 PM, Option1307 (30.67) wrote:

This situation is just like CHBT, are the numbers true? Maybe, maybe not. Either way I sure don't want to take the risk either way. Both companies (and countless others in China) have way too many red flags and seriously raise the question of fraud. Will they be proven to be legit in the end, who knows but that is besides the point.

The real question is, why risk it? There are plenty of other solid companies out there that are great "buys" right now, why do people want to get caught in the middle of a potential fraud?

I understand sh*t happens and we can all get caught off guard or blindsided by fraud/manipulaiton (Enron etc.) but why do people actively seek out these situations. You're setting yourself up for some turbulent times. It makes no sense to me, but I guess it's just not my "cup of tea".

Best luck to all.

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#11) On February 05, 2011 at 5:20 PM, TSIF (99.98) wrote:

It's unfortunate here on CAPS that we can't share information on face value.  Anyone who speaks negatively of a company that someone has some money in must be SHORT. There are many of us here on CAPs who really care and will take time to say so, if we think a company has some issues that could marr it as an investment.  Most of us have been "taken" by unfair representation at some point. I guess the adage that you have to feel the pain yourself holds true in the investment world as well.

 While I do agree that in the case of CCME, Muddy Waters and Citron are openly short and have a lot to gain, that doesn't mean that everyone else is who tries to inject some counter points on an equity is short.  Although citing lawsuits is probably not the best argument, it should be clear that these lawyers, who are definitely in it for themselves and not to educate, aren't going to jump in if they don't smell some blood.


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#12) On February 05, 2011 at 5:20 PM, TSIF (99.98) wrote:

CCME, if legitimate missed it's chance to respond. Chinese New Year or not, if you don't have a clear response ready for these type of attacks then you're not managing your company...especially after the examples set the last few months on other reverse shells.

What should be understood, if you're going to play this one is that whether Muddy Waters and Citron are right or not is that unless you are daytrading, you are playing with dead money.

Look at the history of any of the equities the last year that have been "accused" of fraud.  The Equity remains depressed and will remain depressed for a considerable period of time. At this point, as with other Chinese equities that have been accused, the company is tainted, it will remain priced well below it's peers. 

These company's seeking US exposure would do best to work it through open channels and gain support.  Using reverse shells is a short cut that will put them under intense scrutity.  If so, they'd better have all their ammo ready.

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#13) On February 05, 2011 at 7:11 PM, goldminingXpert (28.71) wrote:

Momentum21: Am I allowed to ever post with the intention of merely informing people? Or can I only post when I have an underlying stake in the stock?

In regards to my drinking, I've had one glass of white wine in the past two weeks. It went with a nice steak. How about you?

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#14) On February 05, 2011 at 7:13 PM, goldminingXpert (28.71) wrote:

TSIF: Speaking of probable frauds, your RPRX pitch cracked me up. I've been dogging this stock promotion since it was at 12 (48 post-reverse split) and it's just as bad as ever at $3 as it was at $48.

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#15) On February 05, 2011 at 9:16 PM, ndavis90210 (97.20) wrote:

Although any hint of fraud is worrisome, the allegations raised by Citron and Muddy Waters seem pretty speculative.  What reason do you have for believing there is any substance to them?

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#16) On February 05, 2011 at 9:20 PM, goldminingXpert (28.71) wrote:

Far from being speculative, these allegations are exceptionally specific. It will be very easy, should CCME be a real company, to disprove their claims. Show us the buses, show us the audited books, show us the customer rolls, and show us why their margins are so much higher than all their competitors. You're rarely going to get a more specific set of charges against a company in fact. If you want to buy CCME, Muddy and Citron have given you a detailed list of potential issues with CCME to research and verify.

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#17) On February 05, 2011 at 9:21 PM, Momentum21 (97.31) wrote:

GMX: I was teasing. No offense was meant...sorry. 

It was odd seeing you picking on another ticker other than RST. ; )

If Citron has done right by you 9 out of 10 times then I would stick by them too. It is the most credible source we have right now.

I just think that particular report is an odd one. Do you think there is a chance that they got in too deep and needed some relief? Just a thought...

Anyhow, I am moving out of Chinese equities myself because of the dead money factor referenced above. The risk is growing and the rewards seem to be getting more rare. Big money is going to be much less likely to give anyone a shot.

I will be having a few drinks tonight. Cheers! 

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#18) On February 05, 2011 at 10:38 PM, goldminingXpert (28.71) wrote:

I've just about finished a table compiling Citron's results from 2001 onward. Through 2008, I can state the 90% figure is low, they're actually right more frequently than that. We'll see if that holds up from 2009-today. I should be done with the (already 7-page) table later this upcoming week.

I never have found covering a wide variety of stocks interesting. I find a few I like, concentrate my investments in them, find a few to short and concentrate my due diligence and put-buying in those. At the moment, I am busy with real estate matters for an internship, so I have little desire to do the day-to-day work necessary to maintain active short positions. However, evidence I've seen indicates that there are lots of overvalued Chinese RTOs on the marketplace, and CCME, in particular, appears to be a clear example of one.

I have written and submitted (though it has not yet been published) a piece with a generally negative outlook on another Chinese RTO (not CCME, CHBT, or any of the others in the news recently). I will link to it on my Fool blog when it is published. I actually don't have a fascination with CCME other than a brief passing interest in it thanks to Citron -- but the Chinese RTO space as a whole looks like a gigantic lions den that desperately needs some outside oversight.

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#19) On February 06, 2011 at 12:42 AM, forexnutca (83.90) wrote:

I'm happy to sell my puts to ya!  This is clear stock manipulation- very penny stock like.  CCME was listed on the threshold list before Citron came out with their report.  Mr. Left got what he wanted....he covered on Friday.  Too many things aligned with this bear attack (Chinese new year, Nasdaq threshold listing, and earnings release next week).  Audited financials will be coming out with this quarter coming up, with the dividend announcement.  All I can say is, the bears are lucky I'm not CEO.  I would of iniatiated the dividend early with the ex-date on thursday- catching the shorts with their pants down.  I'll be happy being on the other side of the trade fellas, but I have long term views and can handle whatever you through at me.  If this company does turn out to be a fraud, I'll be happy to hand my money to ya.

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#20) On February 06, 2011 at 12:47 AM, forexnutca (83.90) wrote:

Andrew Left Mug shot....


Wow....there's a reliable source!

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#21) On February 06, 2011 at 2:09 AM, Mstinterestinman (< 20) wrote:

To be honest even the possibility of fraud makes me avoid these companies if I want to make money in China I will go learn Mandarin and open a business

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#22) On February 06, 2011 at 10:34 AM, wolverine1987 (< 20) wrote:

Wait, you mean to tell me that a couple of law firms are actually SUING? Wow! Well that assures it--the company MUST BE CROOKED. Look, I'm not saying it's impossible that the company is manipulating, but please don't offer a couple of lawsuits as evidence of fraud. As for me, I will definitely stay away from the stock until more is clear. I got lucky Friday and bought in the morning and sold 25% later at 3 in the afternoon so that's enough for me. I'm not belittling your opinion that it is possible that fraud is present--but I also think that there is evidence from seeking alpha and elsewhere that it is not an open and shut case either way.

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#23) On February 07, 2011 at 9:22 AM, DragontoadX (< 20) wrote:

CCME Letter to shareholders: 

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#24) On February 07, 2011 at 12:32 PM, JaysRage (78.00) wrote:

@TSIF -- It was unfair of me to imply that GMXpert was short.   I'll agree with that.   However, I do not understand the passion with which a person can would jump all over a guilty-until-proven-innocent situation.   I think it is an unrealistic expectation to expect any company to know in advance how they will be attacked and have a response prepared in advance.    If you are innocent of wrongdoing, why would you expect someone to attack you?  

CCME came out with a very thorough CEO response this morning that addressed every issue in the Muddy Waters "analysis".   The Muddy Waters document was extremely thorough and there were many points that needed to be addressed.   This is hardly something that can be articulated with only one market day to work on.   A short response on Friday and a more thorough, detailed response today was more than appropriate. 

I was long CCME in both long-term and short-term positions.  I am out as of this morning with a very small profit.     I exited because it no longer fits the risk portfolio of what I invest in.   It has changed from moderate risk to extremely risky/speculative. 

To me, this is no reflection on CCME.   I think they've done everything they can.   I think highly of their management and their business model.    I think they have been violated in the highest degree.   It's hard for me to respect anyone who wants to jump on board the attack-dog bandwagon on this one, especially with a lot of zeal.  

This battle isn't over.   I fully expect that CCME will be attacked again.   I do not have the resources to monitor attacks and rebuttals and manage my portfolio that closely, so I have to sit on the sideline.  

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#25) On February 07, 2011 at 12:40 PM, goldminingXpert (28.71) wrote:

The 15% pump off the CEO letter is all but gone now. A report on its inaccuracies is coming shortly.

Chimin Sang, a brilliant China analyst was formerly CCME's most articulate fan. These are from May 2010

He now agrees that CCME is bad news for shareholders:

When a company's former greatest supporters start slamming it, you know it is lights out.

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#26) On February 07, 2011 at 12:46 PM, goldminingXpert (28.71) wrote:

Bam, there she blows, down to $13.30 in a huge block trade.

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#27) On February 07, 2011 at 12:56 PM, goldminingXpert (28.71) wrote:

$12.60. There's nothing complicated about this situation. One more Citron piece should send this into the single-digits for good.

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#28) On February 07, 2011 at 1:10 PM, DragontoadX (< 20) wrote:


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#29) On February 07, 2011 at 1:15 PM, goldminingXpert (28.71) wrote:

If you say so. Chimin's track record is far more clear than your Xanga dude. Plus, Chimin used to tout CCME highly. Why would he start lying now? It looks bad enough for him to admit his earlier pumping in May was wrong. The only thing worse would be to not acknowledge his mistake, right?

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#30) On February 07, 2011 at 1:20 PM, DragontoadX (< 20) wrote:

Say what you like about the "Xanga dude" but you should check there before jumping to conclusions

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#31) On February 07, 2011 at 1:27 PM, DragontoadX (< 20) wrote:

...besides.. who do you think knows more, the person who spends a couple days or more writing an article or the person who is able to debunk it in 5 minutes?

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#32) On February 07, 2011 at 1:54 PM, TSIF (99.98) wrote:

#24 Jaysrage, I think any Chinese Reverse Merger should have a plan against attacks. The history the last year simply REQUIRES that they be prepared at all times. More transpancy, better investor relations, better websites with verifiable data, etc.  You need to build your defenses when your flanks are vulnerable. 

Several of those under attack came out with a short, we deny it and we'll reply later. This just breeds more uncertainty.

For example, I think Yongye did a great job of responding with less than 12 hours today.  No they need to respond to how the drought is affecting them. It's been going on long enough that they should be forward with the info.

It is a requirement of any company that is going to come public through a reverse shell and not the long road, with minimal analyst following, in a country far, far away with a different culture, (people and financially) to be ready, or anticipate.

As far as GMX's approach, we're a broad range of investors.  Some of us come at it methodically and slowly, some aggressively. Motley Fool has a good balance, and investors can look for the balance that works for them.  Unfortunately, many investors make up their mind about an investment and negative news, rather than lead to questions and evaluation, leads to a defensive position and further entrenchment.

In the case of GMX, he's in the camp where his opinions are easy to discern with his pom-poms and short skirt.  I just wish he'd shave his legs from time to time!!!!  ;)


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#33) On February 07, 2011 at 3:58 PM, JaysRage (78.00) wrote:

The Muddy Waters report was a sophisticated attack.   If you have not dug into it, then you might not understand why it took longer than the 1/2 day that CCME was given to respond to this.   According to the CEO reponse, the sales sheet that MW acquired was doctored to hold incorrect information.    Why would a company expect someone to even have a copy of their sales spreadsheet, much less a doctored version?   Some of the other claims are equally as precise in nature.   These types of allegations needed to be unwound item by item, and there was a lot to unwind.    Muddy Waters knew exactly what they were doing releasing this on Chinese New Year.    Citron was clever to release their report after a nice runup.   MW was brutal releasing their attack on a national holiday.   

While I don't like how MW operates, I have to respect the cold, calculated efficiency of how they do business.   These guys might be relatively new to the investing world, but they are very good.   They make Citron look like kiddie-play.  

I can't imagine cheerleading either side at this point.   If MW is right, then I just don't know if I'll ever be able to do due diligence on any Chinese small cap.   If CCME is right, then there are people illegally attacking companies for profit.   Either way, I feel dirtier for having been involved in this whole situation. 

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#34) On February 07, 2011 at 4:07 PM, gt1135 (78.98) wrote:


Consider the fire stoked.  I've thoroughly enjoyed the commentary in this comments section.  There are certainly some comments that don't promote the discussion, but are nonetheless funny.  I will say that this blog entry has created a single source that I continue to check back on every few hours for updates on the CCME saga.  The points both side make are valid points to be made depending on a given reader's original premise.  I for example bought into CCME in December. I've made 2 more purchases since Friday morning because I think most of this is a sham.  All of the positive commentary seems overwhelming, but there is that nagging worry that I could be wrong based on the negative pub.  I hope it works out for me.  If it doesn't, I'll congratulate the posters who said it was a fraud and I'll go merrily on my way.  But I don't think thats what's going to happen. :)

 Please, keep up the comments and the posting of links.

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#35) On February 07, 2011 at 4:25 PM, TSIF (99.98) wrote:

JaysRage, I agree that if data is fabricated then it can't be defended against, but fabricated data can be attacked, used at the SEC (for what that's worth), and used in court cases etc.  The attackers are forced to use data that is vague to avoid getting changes against them. It looks like this "might" be one of the first of these that actually gets a counter suit if a group of investors cares to fund it.  It would carry more credibility if the company under attack funded it, but this seems unlikely.

My point is that there is a great deal of minor nonsense added to the Citron and Muddy Waters report, however, that could and should have been avoided.  Pictures of headquarters, buses in operation, data on intercity vs rural, comparision of business model against their peers, etc, etc.  This type of data should be clear an easy to obtain without having to search youtube and bandaid it together. The less you can curb, the less material for an attack, the easier to reply/respond to any issues, and avoid the noise. Basic PR 101, taught in any business class and should be reinforced if you have a target painted on you.

No debate whether they deserved the target or not, but the best defense is a good offense! 

qt1135, please keep in mind the points that all fraud, partially fraud, or no fraud, this company's stock price is tainted.  Bounce back is unlikely to occur for some time.  If fraud is proven, then it will continue to decline.  Not a good risk/reward thesis, in my opinion, but best wishes with your attempt.

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#36) On February 07, 2011 at 4:50 PM, ETFsRule (< 20) wrote:

GMX: For someone who isn't short it seems strange that you are so quick to accept every single criticism of CCME, without ever acknowledging when those allegations are debunked. It's almost like you have a personal vendetta against the company.

For example, the article published today on SeekingAlpha about CCME's SAIC filings was complete BS.

SAIC and SEC filings are not supposed to match, and it is completely normal for them to be different. The whole "mistmatch" issue has already been debunked many times before.

From one of the comments on that article:

"If people would take 5 minutes to do some basic Google research, they would understand that it is completely normal for SAIC and SEC filings to be very different, because the two filings have different requirements. There are several articles available on the web explaining the differences:"

Also, you can follow the link in comment #28 in this blog where it is debunked even further.

Do you agree with this? Or do you still feel that the SEC and SAIC filings should match?

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#37) On February 07, 2011 at 5:00 PM, goldminingXpert (28.71) wrote:

SAIC and SEC filings are not supposed to match, and it is completely normal for them to be different. The whole "mistmatch" issue has already been debunked many times before.

I firmly disagree that the mismatch issue has been debunked. Different forms indicate the company was A) too lazy to fill out its SAIC form and hired somebody to make it up, B) was trying to lie to the Chinese government about its tax liability, or C) trying to lie to US investors.

Only A) is at all acceptable of those, but none of the 3 are particularly heartening signs.

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#38) On February 07, 2011 at 5:03 PM, goldminingXpert (28.71) wrote:

The two totally acceptable (and not usually applicable) differences are stated in the Fixyou link. They are business consolidation and activity outside the PRC. Neither apply to CCME, correct?

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#39) On February 07, 2011 at 5:12 PM, JaysRage (78.00) wrote:

From my understanding, it was as simple as the SA article only looked at SAIC reports from one subsidiary, and one of the other subsidiaries held the majority of the SAIC tax liabilities.    In fact, it also corresponds to what the CFO responded to the SA article author.   

I think the laziness or ignorance is on the part of the SA author.  

Now, does a complex organizational structure lead to less transparency and make it more possible for fraud to occur? 

Definitely......and CCME has a somewhat odd organizational structure for sure, but an odd organizational structure in itself does not imply fraud.   It just makes it easier for lazy analysis from a SA author to be incorrect and misleading to investors.

I'm not even invested any more, but I can't help watching the story unfold.   I need some popcorn, cuz this is a very entertaining bout. 

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#40) On February 07, 2011 at 5:24 PM, goldminingXpert (28.71) wrote:

@39. Not so much. The Xanga dude appears to have missed the mark again.


On your blog ( you posted the following diagram:

You claim that Sang was mistaken in looking for CCME taxes at Fujian Fenzhong (FF) because the revenue flows directly to Fujian Across Express (FAE).

1. How is this possible? Fujian Across Express is an FIE, an entity 100%-owned by a foreign company.

CCME was structured as a VIE. The whole purpose of this structure is to get around Chinese rules on foreign ownership. That is the reason for the contracts between FAE and FF. If you are correct that the revenue is flowing directly to FAE, how is this not a violation of Chinese law?

2. According to the agreements between FAE and FF, FAE provides management services in exchange for all of the "profits" of FZ after certain taxes and expenses. If all the revenues bypass FF going straight to FAE, there is nothing to distribute. There is no point for these agreements to even exist.

3. If the revenue is flowing to FAE, then how is FF being compensated. Afterall, everyone agrees that FF is the entity that is actually operating the advertising services business. Is FF being compensated by FAE? If so, why do the contracts between these entities show exactly the opposite type of relationship, namely that FF pays FAE its profits.

4. Where in the 10k (or elsewhere) are the SAIC and SAT documents that you highlight on your blog? You claim that "This stuff is all there." I'd appreciate a link.

Looking forward to your response.

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#41) On February 07, 2011 at 5:58 PM, JaysRage (78.00) wrote:

Interesting.    The plot thickens.  

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#42) On February 07, 2011 at 7:56 PM, DragontoadX (< 20) wrote:

GMX - I am not an expert in this, but after review, this is how I understand it:

The Chinese restrictions on foreign ownership you reference refer only to ownership of  the underlying assets in the operating entity

 The revenue flows to FAE (the FIE) from FF (the operating entity) via contractual obligations, but FAE has no direct ownership in the assets of FF.  Since there is no ownership of the operating assets, its ok for FAE to collect the revenues according to Chinese law.  Good question though! (I saw you copied from the Yahoo message boards unless that is your alter ego)

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#43) On February 07, 2011 at 9:26 PM, ETFsRule (< 20) wrote:

"The two totally acceptable (and not usually applicable) differences are stated in the Fixyou link. They are business consolidation and activity outside the PRC. Neither apply to CCME, correct?" 

No, those are not the only acceptable reasons for differences. Right above that section, it mentions that the two countries have different accounting standards, with completely different requirements (PRC GAAP vs U.S. GAAP). Revenue is reported differently, and there could be other differences as well. I will try to dig deeper when I have more time, but there is no telling how many differences there could be between the two accounting systems.

I'll admit that I'm not an expert on this stuff either (I don't think any of us are). But it does seem that GMX is grasping at straws here. Returning to this link, it explains that SAT filings are audited:

"The SAT requires audited financial data including balance sheet, income statement and cash flow statement and the tax bureaus audit those reports quite frequently themselves and fine offenders who under-report to the SAT. Tax collectors in China are not any less serious than those in Europe or the United States." 

At that same link it explains:

"The auditor is responsible for reconciling U.S. filings with the SAT tax filings in China."

This means that Deloitte audited CCME's SAT filings, as well as their SEC filings.

If these two documents needed to match one another, then Deloitte just committed the stupidest, most obvious oversight ever made by a big four auditor.

I will go out on a limb and assume that this is not the case.

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#44) On February 07, 2011 at 11:11 PM, DragontoadX (< 20) wrote:


wtcbills, a.k.a. "Xanga dude" will reply directly to this question on the Yahoo message board "during his lunch break" (not sure when they get off for lunch in China) heard it here first, folks. 

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#45) On February 08, 2011 at 12:26 AM, DragontoadX (< 20) wrote:

Below are wctbills' responses to the questions:

1. How is this possible? Fujian Across Express is an FIE...

Yes. But no legal violation. The earnings before tax flows into the FAE via a contractual agreement. FAE doesn't own FF, it just has a contract with them.

This is the standard SINA model. Everyone including Baidu and FMCN uses this.

2. 2. According to the agreements between FAE and FF, FAE provides management services in exchange for all of the "profits" of FZ after certain taxes and expenses...

You're right. I was wrong. I wrote "revenue" rather than earnings. Only earnings go into FAE via the contractual agreement. Some earnings are recognized at the FF level, thus you see some being reported at the FF. But Jacky meant, and I don't have a direct quote from him, most of the earnings go into the FAE where the 3-5% tax is paid by FAE. So that earnings going into the FAE is really an earnings before tax... an EBT.

I fixed the picture in my blog. Thank you for pointing it out.

The main point of my blog stands, Chimin needs to look at Across also amd Chimin also needs to provide tax forms with official tax bureau red stamps.

Otherwise, these can be doctored.

3. If the revenue is flowing to FAE, then how is FF being compensated...?

FF is getting "services" from the FAE. Services as in consulting services. That's how all VIE's (BIDU, FMCN, and CCME) do it in China.

Think of Across as the Mckinsey for Fenzhong. So Fenzhong pays Across the earnings before "tax".

4. Please provide a link to your sources...

I'll look it up after I'm done with lunch. 

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#46) On February 08, 2011 at 10:01 AM, DragontoadX (< 20) wrote:


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#47) On February 08, 2011 at 10:24 AM, DragontoadX (< 20) wrote:

Here's another relevant article for those who are interested: 

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#48) On February 08, 2011 at 11:54 AM, ETFsRule (< 20) wrote:

Wow, so much for Mr Sang's credibility. He might end up in prison before this thing is over.

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#49) On February 08, 2011 at 12:06 PM, DragontoadX (< 20) wrote:

I'm personally of the opinion that Mr. Sang is only incompetent and does not deserve prison... 

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#50) On February 08, 2011 at 12:42 PM, goldminingXpert (28.71) wrote:

I'm personally of the opinion that Chimin is still correct and that you all are way off base. I know someone who was the victim of a grand torrent of baseless accusations and name-calling at SeekingAlpha. Myself.


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#51) On February 08, 2011 at 1:10 PM, DragontoadX (< 20) wrote:

Just because you and Chimin have been victims of some viscous and (likely) baseless accusations doesn't mean that you or he are correct.  I don't know much about YONG, but it seemed as though there were some pretty legitimate gripes with your article.  Likewise with Chimin's. I think you're both respectable people trying to do the right thing and honestly believed what you wrote, at least at the time.  I'm not as sure when talking about Mr. Left and Mr. Block, but I will hold off on passing judgement on them myself.

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#52) On February 08, 2011 at 1:11 PM, JaysRage (78.00) wrote:

gmXpert, you've certainly got a lot of evidence against you. Multiple sources have called out how Chimin's article was incorrect in multiple ways, included doctored information, and fell into a category of filings that would have fell under audit control.   You can literally pick any one of those three pieces to take comfort that Chimin's article is properly debunked.   

You can certainly believe whatever you want to believe.   People believe amazing things every day, but the more evidence that you ignore, the further your stance is from rational thought. 

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#53) On February 08, 2011 at 1:29 PM, goldminingXpert (28.71) wrote:

Why would Chimin have written so fawningly about CCME three separate times back in 2010? Why would be embarassingly admit that he was wrong in February 2011? If I were him, and I wanted to baselessly attack a company, it wouldn't be one I called one of my top stock picks of 2010. Chimin is working to protect his own reputation since he HORRIBLY botched his research (I understand why, but still, ouch) in 2010.

You have to think about motives here. There's dozens of Chinese RTOs to go after. It makes no sense for Chimin to have picked this one unless there was fire behind the smoke.

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#54) On February 08, 2011 at 1:44 PM, DragontoadX (< 20) wrote:

An incompetent person could easily botch an investment on both the long and short side.  It does show he is willing to change his mind, which is a good thing, but I'm not convinced he knows what he's doing.

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#55) On February 08, 2011 at 1:59 PM, JaysRage (78.00) wrote:

I don't even think his attacks were baseless.   He had some seemingly compelling arguments.  I think he thought he had a legitimate case.    I think he was simply ignorant and incorrect.   I think he was fed the doctored document and generally had a misunderstanding of the other issues.  

"Never ascribe to malice that which is adequately explained by incompetence." ...

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#56) On February 09, 2011 at 9:12 AM, JaysRage (78.00) wrote:

This article has been removed pending the author's response to a dispute about its accuracy.

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#57) On February 09, 2011 at 11:41 AM, ETFsRule (< 20) wrote:

Chimin's handling of the situation yesterday could not have been much worse.

Did he really think he was fooling anyone when he claimed that the xanga site did not even deserve a response?

On top of that, he had the audacity to take one last cheap shot at CCME before he ran away from the discussion. Good riddance.

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#58) On February 09, 2011 at 1:10 PM, goldminingXpert (28.71) wrote:

Interesting that volume is completely gone today. Wonder if volume will spike as high when Citron part II is released.

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#59) On February 09, 2011 at 1:42 PM, DragontoadX (< 20) wrote:

I would think that shares are in stronger hands now: people not shaken out by part 1 and people who think Block and Left are liars/criminals (not saying they necessarily are, but I think that's a common setiment among current holders)...  I would expect volume to be lower unless part 2 is significantly more convincing than part 1.. On the other hand, if part 2 is not convincing, there could be a short squeeze as those waiting on the sidelines for more clarity on the contents of part 2 jump back in and shorts try to get out... I think this is the more likely way that higher volume could be achieved, but it's just my opinion...

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#60) On February 09, 2011 at 2:04 PM, goldminingXpert (28.71) wrote:

Certainly an interesting stock for gamblers in the short run for the reasons Dragon mentioned.

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#61) On February 09, 2011 at 2:14 PM, JaysRage (78.00) wrote:

Don't rule out a MW part II as well.    I'd be really surprised if the attacks are over for CCME, merited or not.  

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#62) On February 09, 2011 at 2:40 PM, goldminingXpert (28.71) wrote:

No one has successfully to my knowledge discounted anything Citron said, while MW has come under fire for their bit. To me, Citron has far more credibility

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#63) On February 09, 2011 at 5:22 PM, DragontoadX (< 20) wrote:

LOL... must read for anyone investing in Chinese companies 


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#64) On February 09, 2011 at 6:02 PM, goldminingXpert (28.71) wrote:

That's really funny Dragon ... although to be fair, I'd bet the Chinese government is overstating GDP growth ... though not to the degree that mock piece states. ;)

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#65) On February 09, 2011 at 6:59 PM, DragontoadX (< 20) wrote:

Sure.. they have incentives to both overstate GDP growth and to create real GDP growth... I would beware of anything having to do with infrastructure in China.  They really do need to allow their currency to appreciate to make that infrastructure worth it IMHO.  I think they realize this, but politically there are obviously strong forces (entrenched industries) pushing against any change in the status quo.  Companies like CCME that are plays on the (so far repressed) Chinese consumer will benefit from the shift.  Again, just my opinion, maybe we disagree.. I'm not as confident in my macro view, but rely on valuations as a margin of safety.  

Obviously valuations do no good in the case of fraud.  I (and many others) viewed CCME as the most trustworthy of the undervalued U.S.-listed Chinese reverse merger companies prior to the Citron and MW pieces.  The whole reason that I invested in this company was that I was confident it was not a fraud.  I still feel this is the case... I could be wrong, but if I am, and this company is nothing more than a massive pump and dump scheme, then it is the most incredible and perfectly executed one I've ever seen.   

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#66) On February 09, 2011 at 7:12 PM, goldminingXpert (28.71) wrote:

You are correct in that the Chinese companies that ARE legitamite in the reverse-merged smallcap space ARE undervalued. But what % of the Chinese companies that came here by reverse merger are clean and legitamite? That is the question.

There are a lot of fairly clean-looking Chinese companies that I fully believe are legitamite (JRJC comes to mind) ... however the ones with the best growth rates and most unlikely stories (CHBT, CVVT, RINO, ONP, CCME, CAGC) are the ones that will come under fire the most. A lose-lose proposition. You either buy a fairly-valued slow-grower Chinese play like JRJC or you buy a fast-growing opaque company that gets accused of fraud. Tough market, no? 

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#67) On February 09, 2011 at 7:53 PM, DragontoadX (< 20) wrote:

...Of the companies you listed, CCME has by far the highest return on assets... This makes sense.. they don't really need much to run their business.. they just install some equipment on the busses they sign contracts with.. they don't need to buy the (expensive) busses themselves... because of this, growth capex can have an extremely high return.  Furthermore, as their network of busses grows, they have more bargaining power on rates with advertisers. (network effect)

I'm honestly not as familiar with these other names as some are, but let's use ONP as an example... This company makes paper.  If they want to expand their business they need to buy massive buildings and equipment.  The returns of investment in their own business are not likely to be incredible unless they're an incredibly well-run paper company.  As Warren Buffett might say, "maybe somebody knows how to make money in the paper industry, but I don't".  Now in actuality the return on assets of ONP is not all that bad, but unless I can understand how they have some competitive advantage, as far as I know, it just happens to be good business conditions currently for paper companies... regardless, it's one I would avoid when companies like CCME are available at these prices.  Besides that, they probably benefit more than other companies from the artificial suppression of the yuan.  I would imagine yuan appreciation would cut into their margins and I wouldn't want to be around when that happened.  Again.. I don't know as much about this company so maybe I'm overlooking some competitive advantage, but that's my take.

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#68) On February 10, 2011 at 9:52 AM, DragontoadX (< 20) wrote:

Based on the agreement with Starr, if the company doesn't meet performance incentives (being audited by the auditor of Starr's choice, Deloitte) then Cheng Zheng owes more than his net worth to Starr.
That seems like an odd agreement for one to sign if they thought their company was a complete hoax.

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#69) On February 10, 2011 at 1:07 PM, ETFsRule (< 20) wrote:

"No one has successfully to my knowledge discounted anything Citron said, while MW has come under fire for their bit. To me, Citron has far more credibility"

I believe Citron claimed that "no one in China has heard" of CCME. That's been discounted.

Also I believe Citron were the ones who denied that CCME was #1 on the Forbes list of the best Chinese companies. I just checked it out, and that was wrong.

If you copy the characters from the Forbes list into Google translator it gets messed up a little bit. I think it showed up as "China Express Channel" or something like that.

But if you go to Google translator and type in "China Media Express" and translate it from English to Chinese (Traditional), the characters that show up are exactly the same as the ones on the Forbes list.

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#70) On February 10, 2011 at 1:45 PM, DragontoadX (< 20) wrote:

I do not mean to turn this into a personal attack on Mr. Left, but as forexnutca pointed out (post #20), Andrew Left was arrested as recently as December 2010 in relation to petty theft (not sure when this crime was committed)...  Now.. what kind of person does that?  It's the type of thing you might expect from someone who has hit rock bottom and is desparate, or from someone with no sense of morals.. It's not the type of thing you would expect from a successful investor, is it?  If someone is willing to risk being arrested and/or ruining their reputation to take some cheap item that doesn't belong to them, is it really such a stretch to think they might be willing to lie or exagerate to make some money in the stock market?  

If Mr. Left had such good intentions, why didn't he contact the company?

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#71) On February 10, 2011 at 9:24 PM, goldminingXpert (28.71) wrote:

I know this doesn't count, since they are short the stock, but I'll post it anyway so I'll be able to point to yet one more warning longs had before this stock collapsed...

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#72) On February 11, 2011 at 12:33 AM, DragontoadX (< 20) wrote:

An argument doesn't "not count" just because the author is long or short the stock... that's stupid (I don't think you think that, but admittedly, some people do)

This article was also posted on SA, and I would recommend people read it there because then you can actually read people's responses to the points brought up in the analysis as opposed to viewing a one-sided discussion 

...I hope you posted the author's website because that's what you saw first and were not trying to direct people away from the comments.

 Overall, this article was better than most and the author was relatively responsive.  I highly recommend reading it along with the comments.

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#73) On February 11, 2011 at 1:11 AM, DragontoadX (< 20) wrote:

The author (Variant) states that:

The CEO's letter claims that Eading Group is an Apple (AAPL) distributor (wholesaler). Actually, Eading appears to be an authorized reseller (retailer) based on the photos on their website. The difference is material. If it is a retailer then no margin is left for CCME. Also, a wholesale agreement implies volume; a retail agreement implies nothing. I don't think this is a case of "careless translation" because the rest of the letter is very well translated. In the press release about SWITOW, the company is clearly implying something bigger than working with a retailer, although it was toned down slightly in the CEO letter. 

 ...actually, they are an official Apple product distributor: this argument is inaccurate. 


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#74) On February 11, 2011 at 2:10 AM, DragontoadX (< 20) wrote:

As a long, the troubling point (to me) is the "equipment efficiency ratio" argument presented by Variant... I have not seen a good explaination yet.  I'm too tired to look into it in greater depth tonight, but will try to see what I can find tomorrow... I think a lot could depend on what exactly the "equipment" consists of over time.

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#75) On February 11, 2011 at 2:31 AM, goldminingXpert (28.71) wrote:

this is all getting more and more interesting. I wish I knew Chinese ... I hate trusting Google translate, though I've had to use it a lot this week between CCME, YONG, etc.

Didn't realize it was also available at SA, would have linked there had I known. 

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#76) On February 11, 2011 at 10:19 AM, DragontoadX (< 20) wrote:

Regarding the "equipment efficiency ratio", the answer seems to be that the airport busses they've been adding to their network lately have much higher cost per minute than normal busses... Also factoring in somewhat is that the cost of equipment (LCDs, hard drives) has been going down, lowering the denominator in this ratio.

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#77) On February 11, 2011 at 1:32 PM, DragontoadX (< 20) wrote:

...The stock is down a fair amount today, but all I see is your article about Citron... if you're the cause, you are becoming quite the market mover! lol

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#78) On February 11, 2011 at 1:40 PM, goldminingXpert (28.71) wrote:

I doubt I had much to do with it ;)

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