The Kangdexin Fraudulent Export and Forex Scam: A Cross-Border Fraud Loop Involving Waste Film Camouflage and Underground Banking

Who Gets Targeted

The primary victims of this case are approximately 130,000 retail investors in the A-share market, with estimated total losses exceeding 70 billion RMB. Most were lured by Kangdexin's reputation as 'China's 3M,' a 'leader in optical film,' and a '100-billion-market-cap blue-chip stock.' They placed blind faith in its large market capitalization, institutional research reports, and bank confirmation letters, viewing the 12.2 billion RMB in cash on the balance sheet as ironclad proof of solvency. Retail investors generally lacked the ability to independently verify the relationships between financial statement items and failed to timely identify warning signs such as 'high cash and high debt' or 'reliance on a few overseas customers for revenue.' Many continued to increase their positions even before the bond default, ultimately losing everything during the forced delisting.

骗局怎么运作

• Establishing a blue-chip persona and continuous financing: After listing in 2010, Kangdexin positioned itself as a substitute for imported pre-coated and optical films, earning the title 'China's 3M.' With a peak market cap near 100 billion RMB, it continuously raised funds through private placements and bond issuances, creating a platform for fictitious performance and capital pooling, while attracting numerous institutions and retail investors.
• Constructing a fake overseas sales loop: The company colluded with at least 15 overseas customers to sign bogus purchase contracts, disguising waste film as optical film for export. These overseas customers did not actually purchase the goods but merely facilitated the fraud. The funds were then routed through underground banks to create the illusion of 'real payment' for inflated revenue.
• Signing cash management agreements to hollow out the listed company: The actual controller, 'A', orchestrated a 'Cash Management Business Cooperation Agreement' with the controlling shareholder, Kangde Group, and the Xidan Branch of the Bank of Beijing. This agreement stipulated that all funds in the accounts of the listed company and its subsidiaries were to be swept in real-time to the group's account. While the company's books showed a 'balance' of 12.2 billion RMB, the actual account balance was consistently zero, with funds being long-term misappropriated by the controlling shareholder.
• Bank confirmation letters providing false endorsement: The Xidan Branch of the Bank of Beijing issued stamped confirmation letters for audit inquiries and deposit certificates, certifying the funds as 'real and available.' Auditors relied on these to confirm the existence of the cash, providing external credibility to the fictitious 12.2 billion RMB. Investors and creditors lowered their guard, setting the stage for audit failure.
• Inflating profits to cover the gap: From 2015 to 2018, the company cumulatively inflated profits by approximately 11.9 billion RMB through fictitious sales contracts, procurement, logistics, and expenses. In 2018 alone, the inflation rate reached 711%, using this cycle of fraud to mask the hole left by misappropriated funds and to maintain stock prices and refinancing capabilities.
• Bond default triggers the crisis: In January 2019, despite showing 12.2 billion RMB in cash on its books, the company failed to repay a 1.5 billion RMB short-term financing bond ('18 Kangdexin SCP001'). Investors and regulators launched investigations, the lies collapsed, and the company was eventually forced to delist and enter bankruptcy reorganization, with the actual controller 'A' facing criminal charges.

红旗信号（看到这些快跑）

• 🚩 High cash and high debt: Maintaining billions in cash on the books while simultaneously holding significant interest-bearing debt and requiring continuous financing. If the yield on cash is significantly lower than market rates, it suggests the 'cash' may only be a 'book figure.'
• 🚩 High share pledging by major shareholders and frequent capital flows: When controlling shareholders pledge a high percentage of their shares for financing, and there are frequent transactions between the listed company and the major shareholder or related parties, the risk of capital misappropriation is extremely high. A margin call by the pledgee could trigger a chain reaction.
• 🚩 Abnormal bank confirmation responses: If audit confirmation letters are consistently issued as 'real and available' by the same bank that also manages the controlling shareholder's cash pool, investors should demand disclosure regarding cash pooling or 'linked account' arrangements.
• 🚩 Long-term divergence between profit and cash flow: If operating cash flow consistently fails to match book profits and revenue relies heavily on a few overseas customers who refuse to provide authentic procurement documentation, it is a major red flag.
• 🚩 Coexistence of small bond defaults and large cash balances: The inability to repay even small maturing bonds despite having 'ample' cash on the books is the most direct warning sign of financial fraud. Once this occurs, investors should exit immediately rather than believing the company's excuse of 'temporary liquidity tightness.'

真实案例

• In December 2025, the Jiangsu High People's Court issued a final judgment on the Kangdexin financial fraud case, upholding the first-instance verdict of the Suzhou Intermediate Court: Kangdexin was found guilty of fraudulent securities issuance and illegal foreign exchange purchase, fined 410 million RMB. The actual controller 'A' was sentenced to 15 years in prison and fined 20.2 million RMB. Other executives, 'B' and 'C', were also sentenced. This is the final judgment reported by public media.
• In 2020, the CSRC issued an administrative penalty, determining that Kangdexin had cumulatively inflated profits by over 11.5 billion RMB from 2015 to 2018 through fictitious sales and procurement, constituting major financial fraud and false records. In May 2021, the Shenzhen Stock Exchange decided to terminate the listing of the company's shares. At the time of delisting, the stock price was only about 0.2 RMB, leaving approximately 130,000 shareholders with heavy losses. (Source: http://www.news.cn/fortune/2021-03/13/c_1127207104.htm)
• In May 2025, the Bank of Beijing announced it had received a notice of response to a lawsuit regarding Kangdexin's false statements. Plaintiffs, including Zhejiang Zhongtai Chuangying Asset Management Co., Ltd., alleged that the Bank of Beijing's Xidan Branch issued false confirmation letters, leading to audit failure. The amount in dispute is approximately 4.139 billion RMB, and the case has been transferred to the Suzhou Intermediate Court. Another lawsuit involving 5.147 billion RMB is ongoing, with total claims exceeding 9 billion RMB.
• In May 2021, Kangdexin bid farewell to the A-share market: It was forcibly delisted by the Shenzhen Stock Exchange due to major illegal financial fraud. Before delisting, the stock price was only 0.2 RMB, with a total market cap of 710 million RMB, leaving 130,000 shareholders trapped. The CSRC had previously determined that it had inflated profits by over 11.5 billion RMB between 2015 and 2018. (Source: https://m.bjnews.com.cn/detail/162220757014478.html)

Official Stance

• In 2020, the CSRC issued an administrative penalty decision, identifying Kangdexin as a typical case of systemic financial fraud and explicitly pointing out the responsibilities of intermediaries such as auditors, banks, and rating agencies.
• At the end of 2020, the Beijing Office of the CBIRC imposed administrative penalties and fines on the Bank of Beijing and its Xidan Branch for issuing false confirmation letters and deposit certificates, as well as for internal control deficiencies. Relevant businesses were suspended, marking the first official regulatory determination of the financial sector's responsibility in this case.
• In March 2021, Xinhua News Agency published a report titled 'Kangdexin Faces Delisting: A Landmark Case for the Export Barrier,' defining the case as a landmark fraud case in China's capital market and urging investors to pay attention to the normalization of delisting and the construction of investor protection mechanisms.
• In May 2021, the Shenzhen Stock Exchange decided to terminate the listing of Kangdexin shares based on the rules for mandatory delisting due to major illegal activities. The company subsequently entered bankruptcy reorganization, with official channels continuously disclosing information on the delisting arrangement period and reorganization progress.

How to Protect Yourself

• ✅ Establish a 'high cash, high debt' warning: Compare cash balances with interest-bearing debt in financial reports. If high cash and high debt/financing needs coexist with low deposit interest rates, immediately add the stock to a high-risk watch list.
• ✅ Independently verify letters and accounts: Use the Juchao Information website to review announcements regarding cash management, capital pooling, and related-party guarantees. If necessary, independently verify with the bank where the accounts are held. Be wary of 'cash pool' or 'linked account' arrangements and do not rely solely on confirmation letters from a single source.
• ✅ Track major shareholder movements: Check the pledging ratio of controlling shareholders and disclosures regarding capital misappropriation and related-party transactions. High pledging ratios or frequent capital flows between the major shareholder and the listed company should be treated as a major risk signal, warranting a reduction in holdings.
• ✅ Monitor audit and governance changes: Avoid companies with non-standard audit opinions, frequent changes in accounting firms, or mass resignations of independent directors. Subscribe to company announcements and regulatory penalty information to ensure immediate response.
• ✅ Diversify holdings and set stop-loss discipline: Even when holding so-called 'blue-chip' stocks, set position limits and stop-loss lines for financial anomalies. Once contradictory signals like small bond defaults and high cash balances appear, exit unconditionally rather than 'buying the dip.'