Tianhe Chemicals Group Ltd., one of China’s leading chemicals producers, lost nearly $3.1 million in market value after hackers from the group Anonymous Analytics accused it of stock market fraud in early September. Tianhe CEO Wei Xuan denied all accusations of tax dodging and revenue misrepresentation, and requested a halt to Tianhe trading on the Hong Kong Stock Exchange the same day the report surfaced.

When trading resumed on October 9, Tianhe lost $3.1 million in market value, with shares falling by 40 percent, according to the Wall Street Journal.

In its September 2 report, Anonymous Analytics alleges that in 2013 and 2014, Tianhe dodged taxes, engaged in preferential relations with customer companies, and misrepresented the revenue of two of its units—Jinzhou DPF-TH and Fuxin Hengtong.

The accusations against Tianhe come at a time when short sellers—investors who sell stock at higher prices in order to buy it again when the value decreases—are betting on falling share prices of Chinese companies as the country’s economic growth slows. Wei suggested that Anonymous Analytics was using negative press generated from the allegations to manipulate stock prices. In response, the hacker group said it had no direct or indirect interest in Tianhe’s stock.

Morgan Stanley, one of Tianhe’s backers, has said that it stands by the company. Deloitte Touche Tohmatsu Limited, Tianhe’s auditor, is more wary. While no evidence has been found to support Anonymous Analytics’ claims at this point, if they prove correct, Deloitte could face a lawsuit from Tianhe for bad audits and disciplinary action from the Hong Kong Institute of Certified Public Accountants. Possible ramifications for Tianhe are unreported at this time.

In an effort to boost investor confidence in the wake of this scandal, Tianhe has made financial statements available to all registered Tianhe stockholders, and Wei has purchased $13.6 million of company stock in his name.

Despite these losses during the stocking trading suspension, Tianhe earned a third quarter gross profit of $198.6 million, 44 percent higher than the same period in 2013.

(Photo by Ken Teegardin via Flickr)

Posted by Lauren Dodillet