Dimond Kaplan & Rothstein, P.A. is investigating brokerage firm UBS’s sales of American Depository Shares (the “shares”) issued by SinoTech Energy Limited (“SinoTech”) (symbol: CTE). Swiss-banking affiliates UBS AG and UBS Securities LLC were underwriters for SinoTech’s initial public offering in November 2010. It recently was reported that SinoTech’s financial statements were fraudulent. As a result, the price of SinoTech’s shares dropped from the IPO price of $8.50 to $2.35 and NASDAQ halted trading of the shares. UBS’s failure to detect SinoTech’s alleged fraud could subject UBS to liability for SinoTech investors’ losses. Such liability would be another in a long string of recent cases where stockbroker negligence was found based on a brokerage firm’s failure to understand products it is selling.
SinoTech claimed to be a leading provider of enhanced oil recovery services to major oil and gas fields in China. On August 16, 2011, a research analyst issued a report detailing numerous problems with SinoTech’s financial statements and business. Among other things, the report states that: (1) SinoTech’s alleged sole import agent is an empty shell company with no signs of oppeations; (2) SinoTech’s only alleged chemical supplier also is an empty shell company, with little or no revenues; (3) SinoTech’s alleged largest subcontracting customer has unverifiable operations with minimal revenues; (4) SinoTech’s financial statements filed in the U.S. are inconsistent with its financial statements filed in China; and (5) positive statements regarding SinoTech’s internal financial controls were false and misleading.
As the underwriter for and then seller of millions of dollars of SinoTech shares, we believe that UBS was obligated to perform due diligence on SinoTech to determine the accuracy of SinoTech’s financial statements and reported underlying business. It appears that there were numerous things that UBS should have learned about SinoTech that should have caused it to refuse to serve as SinoTech’s underwriter and to refuse to sell SinoTech shares to investors.
If you lost money in SinoTech shares that you bought from UBS, please call attorney Jeffrey Kaplan at Dimond Kaplan & Rothstein, P.A. for a free consultation. Our law firm represents investors who have been victims of securities fraud, stockbroker negligence, and other stockbroker and brokerage firm misconduct.