Opinion ID: 2789180
Heading Depth: 2
Heading Rank: 1

Heading: Jiangbo’s troubled tenure on NASDAQ 1

Text: Jiangbo came into existence as a U.S. corporation in 2007 when its Chinese operational arm, Laiyang Jiangbo, executed a reverse merger with a Florida shell company. 2 The day-to-day operations of Jiangbo’s pharmaceutical business remained in China. Jiangbo hired Elsa Sung, a Florida resident, to be its CFO in October of 2007. She remained in her position for several years, throughout most 1 We draw the facts below from the complaint and construe them in the light most favorable to the plaintiffs, as we must on review of a motion pursuant to Federal Rule of Civil Procedure 12(b)(6). See infra Part II. 2 The name of the shell company was Genesis Technology Group, Inc. Jiangbo acquired its current name in 2009. 2 Case: 14-10213 Date Filed: 03/25/2015 Page: 3 of 24 of the class period during which the investors allege that Jiangbo engaged in fraud, until she resigned on March 31, 2011. On February 25, 2008, Jiangbo first retained one of Frazer’s predecessor entities, Moore Stephens, as its principal accountant. The investors claim that a number of other Chinese corporations created through reverse mergers eventually also retained Moore Stephens’s successor entity, Frazer Frost LLP, as their external auditor. Frazer Frost LLP remained Jiangbo’s auditor during most of the class period, until approximately the end of March 2011, when Jiangbo replaced it with another firm. Frazer came into being as one of two successor entities when Frazer Frost LLP split on May 1, 2011. 3 Jiangbo’s tenure as a public company was short and fraught with suspicion of misconduct. Shares began trading on NASDAQ on June 8, 2010 and traded on that exchange for just under a year. 4 Only six months after trading began, in December 2010, the Securities and Exchange Commission (“SEC”) initiated an informal, non-public investigation and requested certain documents from Jiangbo. By February 2011, Jiangbo’s internal Audit Committee had launched its own nonpublic investigation into the SEC’s areas of concern and retained Cadwalader, Wickersham & Taft LLP (“Cadwalader”) and Ernst & Young (“E&Y”) to assist in 3 The other entity produced by the split was Frost PLLC. The investors allege that both are liable for fraud, but they disclaim any appeal as to Frost PLLC. 4 The class period is the period during which Jiangbo shares traded on NASDAQ. 3 Case: 14-10213 Date Filed: 03/25/2015 Page: 4 of 24 that investigation. The company’s fortunes unraveled quickly soon thereafter. In or around March 2011, Ms. Sung and Frazer withdrew from their respective roles, and the SEC formalized its investigation, which remained non-public. Jiangbo made two significant disclosures in late May 2011 that marked the culmination of its decline: it publicly acknowledged the formal SEC investigation for the first time and reported that the company had defaulted on a relatively small principal payment toward debt from its initial financing. Trading ended days later on May 31, 2011, by which time the share price had fallen from a class-period high of $10.49 per share to $3.08. By November 2011, after Jiangbo had moved to another exchange, its shares were trading for just $0.14.