Another fairly well known fraud (at least among Asia HY/distressed debt guys) was written up by Citron Research yesterday (read here and download their research here).
No point flogging a dead horse. I just wanted to highlight the reason Evergrande is well known among the investment community is because Merrill Lynch and Deutsche did a pre-IPO investment in Evergrande in 2006/7 based on the company's business plan to acquire and develop specific plots of land and 'guarantee' of returns. What happened thereafter was a complete fiasco. The company took the money and acquired completely different land parcels. The paperwork was incomplete and the company could not deliver financial statements. At that point, the pre-IPO investors knew it was a fraud and had pretty much written it off. Amazingly, Evergrande pulled the IPO off and now we know how. If Citron (or anyone interested in further investigation) is reading this, I would recommend speaking with some of the former Merrill and Deutsche investment team members (or HY sellside brokers), the backdrop is very entertaining.
It is shameful Merrill was one of the IPO bookrunners. No way they were not aware of the fraud. They sold a lousy deal to their clients to get them off the hook on a bad investment.
PS. Evergrande is another China high yield bond issuer. I've written before (here) why this is particularly dangerous.
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