Back in October 2007, when the mania for all things speculative fraudulent and Chinese was at its peak, the investment banking powerhouses of Merriman Curhan, and Ford, along with (now jailed) Obama and Clinton fundraiser Hassan Nemazee’s Brean Murray, Carret & Co., brought an obscure Chinese jewelry company public. That company, Fuqi International (FUQI) unlike many disgraced Chinese stocks, still trades today.

Perhaps even more astounding is that the shares of Fuqi have risen from 61c at the start of the year, to around $1.50 earlier this week.

The question is why? FUQI has not filed a 10K for 2009, nor have they filed a 10K for 2010, nor 2011, nor (as of yet) 2012. Investors have no accurate public information. Well, almost none. Although the company cannot provide a set of reliable accounts, they did manage to disclose one small little item….

FUQI has received a nastygram from the SEC. According to an 8k filing on January 10th of this year:

On December 21, 2012, Fuqi International, Inc. (the “Company”) reported that the Company had received a “Wells Notice” from the Staff of the Securities and Exchange Commission (the “SEC”) indicating its intent to recommend to the SEC that it institute a public administrative proceeding against the Company pursuant to Section 12(j) of the Securities Exchange Act of 1934, as amended.  The Company also reported that the Staff of the SEC has offered the Company an opportunity to provide a written response to this proposed action by 5:00 pm EST on January 10, 2013.  Pursuant to the Company’s request, the Staff of the SEC has extended the response date to February 1, 2013.

As a quick aside, FUQI filed an 8K about the Wells Notice a full 20 days after receiving it….a bit tardy for an 8k, which should have been filed on December 23rd. By the time FUQI got around to disclosing the Wells Notice, on the 10th, they had already received their first extension. Timeliness was never a FUQI strong point.

And after missing that extended deadline the SEC granted the company even more time, until March 1st. Of course, the company did not answer, and the SEC still did nothing. Nothing except for granting another extension to March 15:

(T)he Staff of the SEC has offered the Company an opportunity to provide a written response to this proposed action by 5:00 pm EST on January 10, 2013, which response date was extended by the Staff of the SEC to February 1, 2013 and subsequently to March 1, 2013. Pursuant to the Company’s recent request, the Staff of the SEC has extended the response date to March 15, 2013.

As you can guess, March 15th came and went, and FUQI got yet another extension, this time to April 15, 2013.

Pursuant to the Company’s recent request, the Staff of the SEC has extended the response date to April 15, 2013.

While this has been going on, FUQI stock continues to trade. Instead of going ahead with a long overdue too-little-too-late enforcement action, the SEC is giving this sham company extra time on top of extra time on top of more extra time, while doing absolutely nothing to protect investors by halting the stock…even though they are about to bring an action against the company!

So one must ask, what purpose is served by letting these shares continue to trade? Whom are the regulators really protecting? Investors or the corrupt management of Chinese frauds?

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