China Fruits Corp chairman raises US$34M, then goes missing -

China Fruits Corp chairman raises US$34M, then goes missing

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China Fruits Corp chairman raises US$34M, then goes missing

The head of a U.S.-listed fruit company has gone off the radar after raising CNY213 million (US$34 million) from Chinese investors, prompting a lawsuit from two shareholders in the Nanfeng County Court in the Jiangxi province.

At the time of writing, Taina Fruits' website was still under maintenance.

At the time of writing, Taina Fruits' website was still under maintenance.

A police investigation is currently underway over China Fruits Corporation (OTC: CHFR) chairman Chen Quanlong's fundraising activities, which garnered CNY163 million (US$26 million) from investors in Nanfeng and CNY50 million (US$8 million) in Beijing.

CHFR owns a series of subsidiaries under the 'Taina' label, involved in tangerine manufacturing and fruit retailing in China, as well as a business that is intended for the import-export business.

Investors lost contact with Chen in mid-June and began posting statements on the internet. According to posts made in March, Chen had allegedly ceased paying investment interest and other associated fees.

Amidst these allegations, Chen continued to raise funds and he is still yet to face trial. Huang Xingcai, a senior executive at Taina, allegedly made a public statement in court saying all the funds raised went into the chairman's own pocket.

As of now, Taina's official e-commerce website appears to be "under maintenance" and has ceased to function. So has its customer service hotline.

According to CHFR's first quarter statement this year, the revenue from its franchise stores was up 78% year-on-year at US$4 million, while internet-based revenue stood at US$1 million; a boost from nothing a year prior.

"The 2015 target number of retail stores throughout China is expected to grow to 135 in 2015," Chen said in a statement at the time.

As the situation unravels, new testaments from investors have begun to shed light on Taina's "artificial prosperity". Chen Guangming, one of the company's investors, told the National Business Daily the even before Chinese New Year (Feb. 19), Taina had allegedly released information about a delay in interest payments due to strained cash flow.

"Honestly, we didn't think it was a big deal, since many companies face tight cash flow problem as Chinese New Year approaches," Chen Guangming was quoted as saying.

"But in retrospect, I think the company had already become dysfunctional by then."

By April, when many local investors went to Taina's Nanfeng office in order to cash their investments, their requests were denied and they were told to wait. That was when Taina's cash flow problem leaked out to the general public, triggering even more divestment requests.

The National Business Daily reports that local official Huang Liangqun has made efforts on behalf of the local government to reconcile the situation between Chen Longquan and investors. The chairman made a specific payment schedule on May 31, yet the plan was rejected by investors, who demanded the return of their capital immediately.

At the time of writing, CHFR shares had last traded at US$0.95, well below the US$2.13 share price reached in mid-April.

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