FBI Raids Offices, Home of RM Player
By David Feldman at 28 January, 2012, 12:08 pm
Federal criminal investigators have raided the offices and apartment of an active Chinese reverse merger player, according to the Financial Investigator. The player’s group, located on Wall Street, didn’t reply to the reporter’s effort to receive comment. Although the fallout from the allegations of fraud from Chinese reverse mergers has not been substantial yet (other than the SEC’s imposition of the new RM seasoning requirements), this is a fairly serious thing, although it appears no charges have been filed yet. The player had a few regulatory slaps on the wrist previously but nothing major.
I guess the real question is how extensive the criminal investigation is. Does it reach to service providers and others involved in transactions? We don’t know. It’s been quite awhile since the SEC announced its wide-ranging investigation into the microcap industry and the reverse merger world in particular and those doing Chinese deals specifically, and we really haven’t seen any cases brought, civil or criminal, other than one case against an accounting firm several years ago. I know, it takes time to develop cases, and I’m sure we should not view the lack of public action as meaning there is nothing coming. But if the statute of limitations on most of these claims will be five years, it looks like anything that happened before 2007 is now going to be hard for the investigators to reach, except in some cases where the statute can be extended.
What I do know is that “waiting for the other shoe to drop” from the government investigations does have an impact on getting deals done. Players have to have comfort they are dealing with investors, investment banks, accounting and law firms that are not likely to be targeted by the regulators. Hopefully this will come to a head, or not, sooner rather than later.
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