Changpeng Wan
The Shenzhen Stock Exchange has dealt a death blow to gaming and advertising firm *ST Zitian (300280), initiating delisting procedures after revelations of a staggering 2.5 billion yuan ($350M) revenue fraud spanning 2022-2023. This landmark enforcement action follows failed attempts to correct fabricated financial statements, culminating in trading suspension and shareholder losses exceeding 95%. As regulators levy 40 million yuan ($5.5M) in fines against company executives, the case exposes critical vulnerabilities in China’s corporate governance systems.
The Delisting Verdict
Shenzhen regulators delivered a termination notice on July 23, 2025 after *ST Zitian violated mandatory corrections under May 2023 guidelines. Trading formally halted July 21 following disciplinary action tracing back to China Securities Regulatory Commission (CSRC) audits that detected systemic accounting violations.
Regulatory Timelines Ignored
Public filings reveal key deadlines:
- May 20, 2025: CSRC orders financial restatements
- July 19 deadline: Correction failure confirmed
- Maximum 60-day suspension period expired without compliance
The Anatomy of Fraud
*ST Zitian admitted fabricating 24.99 billion yuan ($3.5B) across combined disclosed revenues during 2022-2023. Forensic audits identified three primary deception mechanisms:
Revenue Inflation Techniques
- Fictitious e-commerce transaction cycles
- Round-tripping funds through advertising partners
- Premature recognition of cloud service contracts
Fujian regulatory documents show manipulated earnings represented 63.53% of reported revenues – one of China’s largest admitted falsifications since 2020 securities reforms.
Investor Carnage
Shareholders endured devastation during this period:
The Price Collapse
- 2023 peak: ¥63/share ($8.70 USD)
- Delisting suspension price: ¥2.79 ($0.38 USD)
- 94% value erosion over 18 months
Trading volume patterns show abnormal sell-offs coinciding with regulatory filings, suggesting insider knowledge dissemination according to exchange memos.
Regulatory Reckoning
Consequences escalated beyond delisting to executive accountability:
Monetary Penalties
- Corporate fine: ¥25 million ($3.4M)
- 12 executives fined total ¥15 million ($2.1M)
- Former auditors under investigation
Investor Legal Recourse
Securities attorneys anticipate class actions seeking over ¥100 million ($14M) citing:
- Violated disclosure obligations (CSRC Article 193)
- Misrepresentation in securities prospectuses
- Negligence in auditor oversight duties
Corporate Autopsy
*ST Zitian diversified from gaming peripherals into:
- Programmatic advertising networks
- SaaS cloud infrastructure
- Cross-border e-commerce platforms
Experts cite aggressive acquisition strategies and sudden international expansion as catalysts for accounting manipulation. Its Hanoi-based trading subsidiary received problematic audit opinions weeks before the parent company’s collapse.
Broader Ramifications
This case establishes critical precedents:
- First delisting under SZSE Rule 13.8 amendments
- Immediate removal following trading suspension
- Personal liability clawbacks targeting past management
Market impact suggests accelerated delistings: Five additional companies received suspension warnings since this enforcement.
Investors must now prioritize fundamental governance reviews when evaluating Chinese mid-cap tech stocks. Regulatory filings indicate heightened scrutiny on inconsistent cash flow patterns – a red flag exposed in *ST Zitian’s case. Protect portfolios through thorough accounting verification and regulatory climate awareness.
