Kingold Jewelry, the Wuhan, China–based jewelry manufacturer that is publicly listed in on Nasdaq, faces a local investigation over its alleged use of a “gilded copper alloy” disguised as gold as collateral for bank loans, it announced in an 8-K filed on July 14 with the Securities and Exchange Commission.
The allegations were first brought to light in the local publication Caixin.
The company, which primarily sells jewelry to the domestic market, also announced that its bank accounts have been frozen in connection with various legal proceedings.
Those proceedings include a lawsuit from Anxin Trust Co., filed in February, which claims it is owed approximately RMB 2.3 billion (approximately $330 million). In addition, on July 1, the Bank of Zhangjiakou sent company affiliate Wuhan Kingold Jewelry a notice claiming it was in default of its loan obligations.
The Caixin report alleged that Kingold used “gilded copper” disguised as gold as collateral to obtain $2 billion in loans from banks.
Company chair Jia Zhihong denied the story to the publication.
“How could it be fake if insurance companies agreed to cover it?” he said, according to the news service.
The company had initially announced that its board had formed a special committee to investigate the allegations—but says now that’s not possible, due to its frozen bank accounts.
Kingold also said it was expelled from the Shanghai Gold Exchange on June 20, after that exchange determined that it had committed unspecified violations of its rules and regulations.
In addition, the company faces two class-action suits from purported shareholders, the first filed last month, which claimed that Kingold executives filed “misleading” statements when they declared that their loans were backed with gold.
The company has been listed on Nasdaq since 2000, but now that is also in doubt. On July 6, it said that it had received two notification letters from the stock exchange saying that it was no longer in compliance with the exchange’s listing requirements due to a failure to file its most recent financial results.
(Image courtesy of Kingold)Follow JCK on Instagram: @jckmagazine
Follow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine