Shenzhen, China – September 6, 2024 – Zhengtong Electronics, a leading provider of POS terminals and other financial technology products, has been fined over 10 million yuan (approximately 1.47 million USD) by the Shenzhen Securities Regulatory Bureau for financial fraud. The penalty comes after the company and its senior management were found to have engaged in false accounting practices, according to a disclosure made by the company on September 4, 2024.
The Shenzhen Securities Regulatory Bureau has determined that Zhengtong Electronics, through its subsidiary Guangzhou Yunshuo Technology Development Co., Ltd. (Guangzhou Yunshuo), engaged in fraudulent activities related to its 2017 and 2019 annual reports and non-public issuance documents. The false records, totaling approximately 500 million yuan and 84 million yuan, respectively, were found to have exaggerated the company’s profits by 13.78% and 12.52% during those years.
Specifically, Guangzhou Yunshuo entered into a series of contracts with Guangdong Zijing Information Storage Technology Co., Ltd. (Zijing Storage) and Beijing Yidian Internet Technology Co., Ltd. (Yidian) without delivering the goods involved. These transactions, totaling 217.74 million yuan and 264.81 million yuan, were found to be without commercial substance and were intended to inflate the company’s profits.
The fraudulent activities not only impacted the financial reports but also raised concerns about the company’s internal control and audit processes. In May 2024, the company received a Notice of Investigation from the China Securities Regulatory Commission (CSRC) for suspected violations of information disclosure regulations. The CSRC investigation revealed significant defects in the internal control of Zhengtong Electronics’ financial reporting.
Another concern highlighted by the CSRC was the company’s payment of 39.98 million yuan to Shenzhen Yongtai Shengzheng Construction Engineering Co., Ltd. for engineering expenses. As of the end of 2023, this amount remained listed as an other receivable, and the audit firm was unable to determine the ultimate destination of the funds or whether the full amount could be recovered.
Zhengtong Electronics, a modern high-tech enterprise involved in the fields of IDC and cloud computing, financial technology, and more, has faced financial difficulties in recent years. According to the company’s semi-annual report for 2024, the company’s revenue decreased by 21.52% year-on-year to 5.03 billion yuan, with a net loss of 38.98 million yuan, a decrease of 271.92% from the same period last year. The financial technology sector’s revenue decreased by 8.40% year-on-year to 90.54 million yuan, while the payment product sector’s revenue decreased by 11.43% year-on-year to 277.65 million yuan.
This recent penalty and investigation come as a blow to the company, which has been struggling with financial difficulties and regulatory scrutiny. Zhengtong Electronics will need to address these issues and restore investor confidence to continue its operations in the competitive financial technology industry.
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