When Guangdong-based China Intelligent Lighting & Electronics raised $7.6 million in its initial public offering in 2010, it said it would use the funds for R&D, expansion, working capital and other purposes. But according to a complaint filed by the Securities and Exchange Commission (SEC) in federal court in New York this week, CEO Xuemei Li actually transferred the money straight to other companies, and went on to falsify accounts and mislead the authorities.
The complaint also names a related company, NIVS IntelliMedia Technology, led by Xuemei Li’s brother Tianfu Li. Together the two businesses fraudulently took $29 million from ‘unsuspecting investors’ and diverted it to other companies, the SEC alleges.
The SEC wants the companies to pay back their ‘ill-gotten gains’, plus interest and civil penalties for violating federal securities laws.
The case came out of an investigation that has seen the shares of a number of Chinese companies frozen or taken off US stock exchanges in the past few years. China Intelligent Lighting’s shares traded on the NYSE MKT exchange for nine months before being suspended and eventually delisted in 2011.
The company manufactures Hyundai-branded lighting products as well as its own Cinle range.
At the time of publication China Intelligent Lighting & Electronics had not responded to requests for comment.