(EnergyAsia, March 1 2012, Thursday) — The US Securities and Exchange Commission (SEC) has charged two Chinese executives linked to previously NYSE AMEX-listed Puda Coal with defrauding investors of hundreds of millions of dollars by stealing and selling the mining company’s assets in China.

The SEC lawsuit charges Zhao Ming, the current chairman of Puda Coal, and Zhu Liping, the former CEO, with failing to disclose a 2009 transaction involving the company’s only revenue-producing asset, Shanxi Puda Coal, that benefitted Mr Zhao at the expense of shareholders.

According to the charges, the two men failed to disclose the transactions in Puda Coal’s periodic reports to the SEC, and continued to raise funds from US investors by conducting two public offerings to purportedly raise capital to enable Shanxi Coal to acquire coal mines.

Unknown to investors, Puda Coal no longer had an ownership stake in that company after Mr Zhao’s secret manoeuvres.

Despite on-going investigations, the SEC said the two men further schemed to forge a letter from the Chinese financial firm purporting that Puda Coal investors weren’t harmed by the asset transfers. In reality, the scheme left Puda Coal as a shell company with no ongoing business operations.

Robert Khuzami, director of the SEC’s Division of Enforcement, said:

“Zhao and Zhu duped investors with promises that their money would be invested in a Chinese coal company when in fact the company was an empty shell that had been looted by the defendants.

“This enforcement action reflects our continuing commitment to hold accountable officers and directors of issuers who misuse their access to the U.S. capital markets to commit fraud for personal gain.”

George S. Canellos, director of the SEC’s New York Regional Office, said:

“The massive fraud perpetrated by Zhao and Zhu wiped out hundreds of millions of dollars in shareholder value and was compounded by their brazen obstruction of the SEC’s investigation.”

According to the SEC’s complaint filed in the US District Court for the Southern District of New York, Puda Coal entered the US capital markets through a reverse merger in July 2005. Puda Coal’s common stock was listed and traded on the NYSE Amex from September 2009 to August 2011.