US launches accounting fraud probe on US-listed Chinese firms

The US Department of Justice (DoJ) has launched a criminal investigation against accounting irregularities of Chinese firms listed on US stock exchanges sending Chinese Internet stocks tumbling yesterday in the New York Stock Exchange.

Robert Khuzami, director of enforcement at the US Securities and Exchange Commission (SEC) told Reuters, ''There are parts of the Justice Department that are actively engaged in this area,'' and added that federal prosecutors are involved in investigating Chinese companies.''

Without identifying which Chinese companies are under investigation, Khuzam added, ''I think that you will see greater (DoJ) involvement as time goes on.''

The news sent the stocks tumbling of Chinese companies with Internet stocks being hit hardest.

Youku, which is similar to Youtube, was among the hardest hit, falling 18 per cent, Baidu, the Chinese search engine giant, fell 9.2 per cent, e-commerce site Sina fell by 9.7 per cent, search engine portal Sohu lost 5.3 per cent, Youku.com plunged 18.41 per cent, Spreadtrum Communications lost 10.90 per cent, Shanda Interactive fell 8.75 per cent and NetEase.com by 2.23 per cent.

Khuzami also said that the SEC and the Federal Bureau of Investigation had launched investigations independently on Chinese companies listed in the US about a year ago.