Kingold Dives On Fraud Accusations

Kingold Jewelry Inc (NASDAQ: KGJI) shares are tumbling 16.67 percent on roughly 14 times their average volume. The shares are now at their lowest level in over six months.

The Aurelius Instablog at Seeking Alpha in a post on Monday highlighted fraudulent practices by Kingold Jewelry.

Form S-3

The warning came after a recent Form S-3 filing by the company for an $80 million shelf offering. The company also indicated last week it will seek to raise fresh capital.

The blog said the company is much smaller than what it is making itself out to be, and it has made asset pledges in amounts exceeding its Chinese-reported shareholder's equity.

'Fraud School' Promoted

Kingold Jewelry is promoted by a fraud school, the blog said. A fraud school is defined as a small investment bank that touts worthless enterprises as the next promising opportunities, tutoring the companies they help complete an IPO in the United States and subsequently a primary exchange listing to produce false reporting documents.

Following a failed attempt to list in China (refused clearance due to abnormality in revenue growth), the company completed a reverse U.S. merger, all credits to its fraud school, identified by Seeking Alpha as Chief Capital based in Hong Kong. The report also unearthed irregularities in the financial statements of Kingold Jewelry.

At last check, the shares were down 15 percent at $1.48.