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This offer ends January thirty first. 16 00:00:59,240 --> 00:01:01,680 Speaker 1: On this episode of the News World, we begin our 17 00:01:01,800 --> 00:01:05,240 Speaker 1: three part series about China, starting with a look at 18 00:01:05,280 --> 00:01:09,840 Speaker 1: how Chinese companies are trading on US stock exchanges. But 19 00:01:10,040 --> 00:01:12,640 Speaker 1: is their market value really what they say it is. 20 00:01:13,600 --> 00:01:16,960 Speaker 1: My guest today will tell you about their experiences investing 21 00:01:17,000 --> 00:01:21,200 Speaker 1: in these Chinese companies and about their inflated valuations and 22 00:01:21,319 --> 00:01:25,240 Speaker 1: the shell game they're playing on American investors. I'm pleased 23 00:01:25,280 --> 00:01:29,280 Speaker 1: to introduce my guests, Dan David, founder and CEO of 24 00:01:29,280 --> 00:01:34,120 Speaker 1: Wolfpack Research, and Race Nader, an American investor who lost 25 00:01:34,160 --> 00:01:38,200 Speaker 1: part of his retirement savings on Chinese investments. This is 26 00:01:38,400 --> 00:01:53,480 Speaker 1: China's con game. May the buyer beware designers? Thin that 27 00:01:53,480 --> 00:01:56,360 Speaker 1: you grew up in Flint, Michigan. I did very proud 28 00:01:56,400 --> 00:02:01,440 Speaker 1: of that. How did that experience affect of thinking and 29 00:02:01,600 --> 00:02:05,080 Speaker 1: the way in which you approach this whole issue of China. 30 00:02:05,280 --> 00:02:09,120 Speaker 1: I grew up very middle class general motors Flint, Michigan. 31 00:02:09,600 --> 00:02:11,919 Speaker 1: People were from the shop. People are honest. These assaults 32 00:02:11,960 --> 00:02:14,799 Speaker 1: of the earth people to me, I still go back 33 00:02:14,800 --> 00:02:18,560 Speaker 1: there every year. It's a very sad situation economically, but 34 00:02:19,200 --> 00:02:21,760 Speaker 1: just some of the best people in the country. And 35 00:02:22,320 --> 00:02:25,040 Speaker 1: my outlook is that we all take care of each other. Then, 36 00:02:25,480 --> 00:02:27,320 Speaker 1: if you don't mind, I'd like to sort of start 37 00:02:27,320 --> 00:02:31,400 Speaker 1: at the beginning, what's your investment background? And mid two 38 00:02:31,480 --> 00:02:35,200 Speaker 1: thousands I joined forces with somebody with an investment background 39 00:02:35,240 --> 00:02:39,639 Speaker 1: and we started geo Investing, which was basically a website 40 00:02:39,680 --> 00:02:44,480 Speaker 1: that provided content on certainly under followed stocks. As a 41 00:02:44,520 --> 00:02:46,920 Speaker 1: for instance, once you're below a certain market cap. It 42 00:02:46,960 --> 00:02:49,359 Speaker 1: was very hard to find information about these companies. In 43 00:02:49,400 --> 00:02:51,840 Speaker 1: the mid two thousands, it was all on the longside. 44 00:02:51,960 --> 00:02:54,440 Speaker 1: We never short at anything or had any kind of 45 00:02:54,960 --> 00:02:58,080 Speaker 1: idea to short anything. It was never an our calculus. 46 00:02:58,680 --> 00:03:00,520 Speaker 1: And two thousand and eight came along, and that was 47 00:03:00,560 --> 00:03:04,880 Speaker 1: certainly an event that affected all of us, and we 48 00:03:04,880 --> 00:03:07,880 Speaker 1: were really taken back in those last two months and 49 00:03:08,120 --> 00:03:12,280 Speaker 1: decided that our investment philosophy worked. It was value investing. 50 00:03:12,320 --> 00:03:14,520 Speaker 1: It worked for twenty years, and we would stay with that. 51 00:03:14,680 --> 00:03:19,880 Speaker 1: And in that scenario, value investing took us to China, 52 00:03:20,040 --> 00:03:22,960 Speaker 1: because when we started to compare two thousand and nine, 53 00:03:23,040 --> 00:03:25,720 Speaker 1: any of the companies that we're going to grow their 54 00:03:25,720 --> 00:03:28,760 Speaker 1: revenues by fifty or one hundred percent, or we're going 55 00:03:28,880 --> 00:03:32,840 Speaker 1: to become more profitable by the same margins. It largely 56 00:03:32,880 --> 00:03:36,240 Speaker 1: took us to China. And we had eighty percent less 57 00:03:36,320 --> 00:03:41,280 Speaker 1: of our portfolio we put into China, and we picked 58 00:03:41,360 --> 00:03:43,440 Speaker 1: up two hundred and twenty nine percent in two thousand 59 00:03:43,440 --> 00:03:47,120 Speaker 1: and nine, and we just thought we were very smart guys. 60 00:03:48,080 --> 00:03:51,840 Speaker 1: Around two and ten, people started to come out and 61 00:03:51,880 --> 00:03:54,320 Speaker 1: say some of the companies that we had invested in 62 00:03:54,360 --> 00:03:57,680 Speaker 1: were frauds. And even though we had exited some of 63 00:03:57,720 --> 00:04:00,440 Speaker 1: those positions and made money by part and I got 64 00:04:00,440 --> 00:04:03,120 Speaker 1: together and said, look, we're either smart or we were lucky, 65 00:04:03,600 --> 00:04:06,280 Speaker 1: and lucky is no way to invest. So let's go 66 00:04:06,360 --> 00:04:09,960 Speaker 1: prove these people wrong. These companies are listed on the 67 00:04:10,040 --> 00:04:13,200 Speaker 1: US Stock Exchange. Yes they're based in China, but if 68 00:04:13,240 --> 00:04:15,880 Speaker 1: they're listed on the US exchange, they have to be 69 00:04:15,960 --> 00:04:19,880 Speaker 1: valid because they're audited. They're beholding to the SEC and 70 00:04:20,040 --> 00:04:23,440 Speaker 1: our rules and our listening standards on the NASDAC or 71 00:04:23,440 --> 00:04:25,719 Speaker 1: New York Stock Exchange, so they have to be wrong. 72 00:04:26,680 --> 00:04:29,400 Speaker 1: We hired our own due diligence team and sent them 73 00:04:29,440 --> 00:04:34,080 Speaker 1: to look at thirty companies in China and come back 74 00:04:34,240 --> 00:04:39,279 Speaker 1: and tell us what you see. And after two months 75 00:04:39,279 --> 00:04:42,479 Speaker 1: they came back and said, the short sellers are wrong. 76 00:04:42,640 --> 00:04:46,960 Speaker 1: They're understating the problem. Every one of these thirty companies 77 00:04:46,960 --> 00:04:51,040 Speaker 1: were frauds, every one of them, all thirty out of 78 00:04:51,120 --> 00:04:55,680 Speaker 1: thirty that we had them look at. We're frauds on companies. 79 00:04:56,040 --> 00:04:58,480 Speaker 1: At any given day, a factory is not running at all, 80 00:04:58,560 --> 00:05:01,920 Speaker 1: there's nobody there. And then you see us in our 81 00:05:01,920 --> 00:05:05,640 Speaker 1: time lap surveillance. One day, lights start to come on 82 00:05:06,240 --> 00:05:08,920 Speaker 1: the next day, smokes start coming out of the smokestacks. 83 00:05:09,560 --> 00:05:13,279 Speaker 1: The next day some employees start milling around, and then 84 00:05:13,279 --> 00:05:16,400 Speaker 1: on the fourth day, two busloads of American investors get 85 00:05:16,400 --> 00:05:18,800 Speaker 1: off the bus, take a tour of the factory, finish 86 00:05:18,880 --> 00:05:24,080 Speaker 1: their tour, leave factory shuts down. We went to the 87 00:05:24,120 --> 00:05:26,280 Speaker 1: New York Stock Exchange, We went to Nasdack, We went 88 00:05:26,279 --> 00:05:29,799 Speaker 1: to the SEC, and we were telling them what we found. 89 00:05:30,040 --> 00:05:32,160 Speaker 1: And when you're dealing with the SEC, of course it's 90 00:05:32,160 --> 00:05:34,600 Speaker 1: a one way conversation, so we never knew what they 91 00:05:34,640 --> 00:05:37,920 Speaker 1: were doing. But the exchanges were dismissive. They're like, coour 92 00:05:38,040 --> 00:05:40,360 Speaker 1: you Dan David, and they've never heard of you. Once 93 00:05:40,440 --> 00:05:42,400 Speaker 1: you get out of here. We went to the investment banks. 94 00:05:42,400 --> 00:05:45,280 Speaker 1: You are taking ten percent of these transactions, right, so 95 00:05:45,320 --> 00:05:48,279 Speaker 1: every time they raise money from American investors caught fifty 96 00:05:48,279 --> 00:05:50,560 Speaker 1: million dollars or one hundred billion dollars, they get ten 97 00:05:50,600 --> 00:05:53,000 Speaker 1: percent of the transaction. And they would always tell us 98 00:05:53,520 --> 00:05:56,000 Speaker 1: that we vet these companies in China. We go look 99 00:05:56,000 --> 00:05:59,280 Speaker 1: at them, we earned this ten percent, not just paperwork. Okay, 100 00:05:59,520 --> 00:06:02,520 Speaker 1: So to them when we said, look, you're getting it wrong. 101 00:06:03,240 --> 00:06:05,480 Speaker 1: These are frauds. I'm sure you want a better product 102 00:06:05,480 --> 00:06:07,680 Speaker 1: than this. Let us help you with your due diligence 103 00:06:08,000 --> 00:06:10,760 Speaker 1: so that you're not putting these project of companies on 104 00:06:10,800 --> 00:06:15,080 Speaker 1: the US exchanges. And they said to us, essentially, wait 105 00:06:15,080 --> 00:06:19,120 Speaker 1: a minute, you want us to pay you to not 106 00:06:19,279 --> 00:06:21,400 Speaker 1: list companies on the New York Stock Exchange and not 107 00:06:21,440 --> 00:06:23,479 Speaker 1: get paid. So we're supposed to pay you and not 108 00:06:23,520 --> 00:06:25,400 Speaker 1: get paid. Why don't you get out of here before 109 00:06:25,400 --> 00:06:28,400 Speaker 1: we see you? This is a very frustrating thing. Why 110 00:06:28,440 --> 00:06:33,360 Speaker 1: weren't they interested in defending the American investor? Because banks 111 00:06:33,360 --> 00:06:35,800 Speaker 1: are not American banks. They're here for our laws and 112 00:06:35,800 --> 00:06:40,039 Speaker 1: our protections, but they're beholden to shareholders. They're agnostic as 113 00:06:40,080 --> 00:06:44,440 Speaker 1: to any kind of country loyalty, especially when you're talking 114 00:06:44,520 --> 00:06:48,359 Speaker 1: Deutsche Bank or HSBC. I mean, what does HSBC stand 115 00:06:48,400 --> 00:06:51,880 Speaker 1: for Hong Kong Changhai National Banking Corporation. I mean, they 116 00:06:51,920 --> 00:06:55,080 Speaker 1: don't care. And Morgan Stanley, Golden's acted, all the rest 117 00:06:55,080 --> 00:06:58,200 Speaker 1: of them. They're saying, then what about the government agency? 118 00:06:58,839 --> 00:07:01,640 Speaker 1: It was just supposedly it up to care, well the 119 00:07:01,720 --> 00:07:05,080 Speaker 1: government agencies. To be fair, We're just taken aback at 120 00:07:05,080 --> 00:07:07,280 Speaker 1: the scale and the scope of the fraud, like it 121 00:07:07,320 --> 00:07:10,280 Speaker 1: was just a fire hose to the face and you 122 00:07:10,320 --> 00:07:14,080 Speaker 1: couldn't believe that this was happening. And at some point 123 00:07:14,160 --> 00:07:17,360 Speaker 1: we figured out some things that were just incredible to 124 00:07:17,440 --> 00:07:20,440 Speaker 1: be true at face value. Number one, it's not illegal 125 00:07:20,520 --> 00:07:22,640 Speaker 1: for a Chinese citizen to steal from a US citizen. 126 00:07:24,120 --> 00:07:28,480 Speaker 1: So if these CEOs of these China based companies listed 127 00:07:28,600 --> 00:07:32,880 Speaker 1: on our exchange, and this answers your original question, who 128 00:07:32,920 --> 00:07:35,600 Speaker 1: got the money, it would be the CEO or the 129 00:07:35,680 --> 00:07:40,640 Speaker 1: executives in China. They steal the money, and there's nothing 130 00:07:40,640 --> 00:07:43,080 Speaker 1: we can do to them legally because once the money 131 00:07:43,120 --> 00:07:46,840 Speaker 1: goes to China, there's no clawback provision either, so you 132 00:07:46,880 --> 00:07:49,640 Speaker 1: can't put them in jail, you can't get the money 133 00:07:49,640 --> 00:07:53,560 Speaker 1: back out of China, and investors are left with suing 134 00:07:53,600 --> 00:07:56,240 Speaker 1: the shell of a company and getting paid out through 135 00:07:56,360 --> 00:07:59,880 Speaker 1: directors and officers insurance, most of which a class accident 136 00:08:00,000 --> 00:08:02,040 Speaker 1: and he's going to take thirty percent of It's a 137 00:08:02,160 --> 00:08:06,280 Speaker 1: mess or is a traditional Roman role of caveat um 138 00:08:06,320 --> 00:08:09,800 Speaker 1: tour Let the buyer beware. But you're suggesting that here 139 00:08:10,560 --> 00:08:15,040 Speaker 1: nothing you read actually is validdable because they're all basically 140 00:08:15,080 --> 00:08:18,240 Speaker 1: built around fraud. Well, we have that in the United States. 141 00:08:18,320 --> 00:08:22,320 Speaker 1: Your point if it's buyer beware. I'm notionally fine with that, 142 00:08:22,400 --> 00:08:27,640 Speaker 1: although I do feel like we as professionals, oh people 143 00:08:27,680 --> 00:08:31,280 Speaker 1: who work fixing our cars or making our food or 144 00:08:31,320 --> 00:08:34,600 Speaker 1: doing these things they do for us, and we're supposed 145 00:08:34,640 --> 00:08:37,800 Speaker 1: to be protecting them. As you pointed out, having said that, 146 00:08:37,840 --> 00:08:39,800 Speaker 1: we have pumping dumps here in the United States that 147 00:08:39,880 --> 00:08:42,640 Speaker 1: are fake companies and things of that nature. But what 148 00:08:42,800 --> 00:08:46,200 Speaker 1: the American people aren't aware of. Those people can go 149 00:08:46,240 --> 00:08:48,920 Speaker 1: to jail when they're called. Those people will pay a fine. 150 00:08:49,000 --> 00:08:53,400 Speaker 1: Those people can be notionally held accountable. What investors share 151 00:08:53,400 --> 00:08:56,600 Speaker 1: in the United States aren't aware of is that being 152 00:08:56,640 --> 00:09:00,679 Speaker 1: audited by a top four auditor means nothing at all 153 00:09:00,720 --> 00:09:03,440 Speaker 1: if it's in China, because if that auditor is wrong, 154 00:09:03,559 --> 00:09:07,600 Speaker 1: they have all kinds of disclaimers saying, hey, we're giving 155 00:09:07,679 --> 00:09:11,400 Speaker 1: you the information management's giving us, and management can lie, 156 00:09:11,440 --> 00:09:13,559 Speaker 1: cheat and steal and not go to jail and keep 157 00:09:13,559 --> 00:09:16,160 Speaker 1: the money. Now, who here in the United States was 158 00:09:16,200 --> 00:09:20,240 Speaker 1: aware of that? When you say that in the investigations 159 00:09:20,280 --> 00:09:24,880 Speaker 1: you guys did, thirty out of thirty companies, we're fraudulent. 160 00:09:26,320 --> 00:09:29,240 Speaker 1: That's kind of breathtaking. There are many, many more. There 161 00:09:29,280 --> 00:09:31,680 Speaker 1: are hundreds. As a turned, those are just the first 162 00:09:31,720 --> 00:09:34,440 Speaker 1: thirty we looked at. And I will tell you the 163 00:09:34,440 --> 00:09:38,200 Speaker 1: first two critical reports we wrote. We'll put out this 164 00:09:38,240 --> 00:09:41,760 Speaker 1: information for free and investors will love us and they'll 165 00:09:41,840 --> 00:09:45,120 Speaker 1: come pay for our information, our due diligence. But investors 166 00:09:45,120 --> 00:09:48,360 Speaker 1: basically chose to see us as short sellers anyway, even 167 00:09:48,360 --> 00:09:50,240 Speaker 1: though we said we didn't short it, and we didn't. 168 00:09:50,559 --> 00:09:53,120 Speaker 1: If you're going to write negative information, you're short. And 169 00:09:53,200 --> 00:09:55,679 Speaker 1: they were buying our research, and neither were the investment 170 00:09:55,720 --> 00:09:58,480 Speaker 1: banks who really should have been buying it. So from 171 00:09:58,520 --> 00:10:01,440 Speaker 1: then on we started shorting. When I call the investment 172 00:10:01,480 --> 00:10:03,439 Speaker 1: banks or I talk to anybody or the auditors, or 173 00:10:03,840 --> 00:10:07,120 Speaker 1: they take my calls. Now, I mean, we've made millions. 174 00:10:08,040 --> 00:10:12,160 Speaker 1: And the reason the China Hustle got made is because 175 00:10:12,200 --> 00:10:16,920 Speaker 1: at some point I realized that the money that we're 176 00:10:16,920 --> 00:10:20,640 Speaker 1: making comes from my neighbors and my family and fellow Americans, 177 00:10:20,800 --> 00:10:24,439 Speaker 1: because they're not made whole once that fraud is exposed. 178 00:10:25,120 --> 00:10:29,720 Speaker 1: So it's a binary proposition. You're short, you win, somebody loses. 179 00:10:30,200 --> 00:10:32,719 Speaker 1: That somebody isn't the person committing fraud in China. That 180 00:10:32,840 --> 00:10:37,800 Speaker 1: somebody is my family. And that's why we started lobbying Congress, 181 00:10:39,440 --> 00:10:43,040 Speaker 1: coming up Dan Lobby's Congress from more financial oversight and 182 00:10:43,200 --> 00:11:08,960 Speaker 1: protection from American investors. So what kind of reaction have 183 00:11:09,000 --> 00:11:11,800 Speaker 1: you gotten so far? It was very slow. I started 184 00:11:11,800 --> 00:11:16,280 Speaker 1: in two and fourteen lobbying Congress, and it was a 185 00:11:16,360 --> 00:11:18,679 Speaker 1: very tough thing for me to see. As mister Smith 186 00:11:18,720 --> 00:11:23,480 Speaker 1: goes to Washington, there were some very intellectually challenged members 187 00:11:23,520 --> 00:11:26,679 Speaker 1: of Congress whore it came to finance, and they were 188 00:11:26,720 --> 00:11:29,400 Speaker 1: asking me what they should do. The truth is, you 189 00:11:29,480 --> 00:11:31,560 Speaker 1: know a lot more about it than they do. It's 190 00:11:31,600 --> 00:11:34,600 Speaker 1: not totally irrational to say to a guy who's spent 191 00:11:34,720 --> 00:11:37,719 Speaker 1: years studying it, so how would you solve it? I 192 00:11:37,760 --> 00:11:40,840 Speaker 1: wasn't an expert on policy, though, you know, I could 193 00:11:40,840 --> 00:11:43,079 Speaker 1: point out that, like, here's what you don't know. Even 194 00:11:43,360 --> 00:11:45,520 Speaker 1: the members of Congress didn't know that it wasn't illegal 195 00:11:45,960 --> 00:11:48,360 Speaker 1: for somebody to lie, cheat and steal in China not 196 00:11:48,360 --> 00:11:50,600 Speaker 1: be held to complare in the United States. But you know, 197 00:11:50,679 --> 00:11:53,920 Speaker 1: isa an investor wasn't aware of what the laws were, 198 00:11:54,000 --> 00:11:55,960 Speaker 1: what the policies were, and things of that nature. I 199 00:11:56,000 --> 00:11:57,880 Speaker 1: had to go back over the next year and become 200 00:11:57,920 --> 00:12:01,080 Speaker 1: aware of policy, and then come back and try to 201 00:12:01,120 --> 00:12:05,120 Speaker 1: match my experience versus what the policy is, versus what 202 00:12:05,160 --> 00:12:08,080 Speaker 1: the policy could be. So I did end up doing 203 00:12:08,160 --> 00:12:11,840 Speaker 1: that in twenty and fifteen, and I started offering solutions. 204 00:12:11,840 --> 00:12:14,680 Speaker 1: And one of the most basic solutions that I offered, 205 00:12:14,840 --> 00:12:17,880 Speaker 1: I mean, obviously there's the nuclear option of delisting these companies, 206 00:12:18,280 --> 00:12:20,880 Speaker 1: and everybody just kind of just sat back and said, oh, no, 207 00:12:20,960 --> 00:12:24,040 Speaker 1: we'll never do that. I said, okay, Well, if you're 208 00:12:24,040 --> 00:12:26,559 Speaker 1: going to come at this from a perspective of buyer beware, 209 00:12:27,320 --> 00:12:29,920 Speaker 1: then let's make people aware. On a pack of cigarettes, 210 00:12:29,920 --> 00:12:31,640 Speaker 1: there's a warning label on there that says, if you 211 00:12:31,679 --> 00:12:34,280 Speaker 1: smoke these things, they may kill you. How about a 212 00:12:34,320 --> 00:12:36,800 Speaker 1: ticker symbol for a China base stock. You have an 213 00:12:36,840 --> 00:12:40,360 Speaker 1: asterisk with a dropdown box that would explain to people 214 00:12:41,280 --> 00:12:45,000 Speaker 1: the lack of accountability versus a US health stock, you know, 215 00:12:45,080 --> 00:12:48,200 Speaker 1: from a US based company or European based company. And 216 00:12:48,240 --> 00:12:50,200 Speaker 1: I couldn't even get that done. And I thought that 217 00:12:50,280 --> 00:12:54,040 Speaker 1: was pretty simple. You're gonna step further, it seems to me, 218 00:12:55,120 --> 00:12:58,960 Speaker 1: and I think you made an estimate that maybe as 219 00:12:59,040 --> 00:13:03,240 Speaker 1: much as fourteen billion dollars has been lost in our 220 00:13:03,360 --> 00:13:07,000 Speaker 1: pension and retirement funds by investing in these kind of 221 00:13:07,040 --> 00:13:11,760 Speaker 1: fraudulent companies. That's just what we exposed at my firm. 222 00:13:11,800 --> 00:13:16,720 Speaker 1: It's a much bigger, bigger number. At my small firm, 223 00:13:16,920 --> 00:13:20,400 Speaker 1: we exposed over fifteen million dollars. And you know, from 224 00:13:20,600 --> 00:13:23,840 Speaker 1: direct money race from investors to market cap loss, it's 225 00:13:23,920 --> 00:13:27,920 Speaker 1: hundreds of billions of dollars that has been lost. And 226 00:13:28,320 --> 00:13:31,520 Speaker 1: what people don't realize now this is so quint to 227 00:13:31,600 --> 00:13:35,400 Speaker 1: Central China. And when you're dealing with the Chinese outlook 228 00:13:35,480 --> 00:13:37,680 Speaker 1: on any kind of strategy or situation, and they do 229 00:13:37,760 --> 00:13:41,960 Speaker 1: consider finance warfare, they just do. It's a competition, right, 230 00:13:42,000 --> 00:13:46,720 Speaker 1: So there's it is an unconventional financial warfare to them 231 00:13:46,800 --> 00:13:49,240 Speaker 1: in two thousand and eight, when you look at where 232 00:13:49,240 --> 00:13:54,000 Speaker 1: we were during our financial crisis, China is largely comparatively 233 00:13:54,040 --> 00:13:57,720 Speaker 1: speaking to test from our economy, which very much so 234 00:13:57,960 --> 00:14:02,800 Speaker 1: helped them during crisis. One hundred billion dollars of market 235 00:14:02,840 --> 00:14:06,720 Speaker 1: cap on our US exchanges is what I figured out 236 00:14:06,720 --> 00:14:09,320 Speaker 1: that they in my opinion, what they had here now 237 00:14:09,360 --> 00:14:14,040 Speaker 1: the number some ten plus years later is one point 238 00:14:14,040 --> 00:14:19,040 Speaker 1: three trillion dollars. So what they've said is, thank goodness, 239 00:14:19,040 --> 00:14:22,280 Speaker 1: we were not attached to the US market during their crisis. 240 00:14:22,360 --> 00:14:25,760 Speaker 1: But our crisis is coming. We are going to have 241 00:14:25,800 --> 00:14:28,360 Speaker 1: a big problem. We have a banking crisis coming. They do, 242 00:14:28,920 --> 00:14:32,440 Speaker 1: a real estate bubble coming, they do, they have civil 243 00:14:32,560 --> 00:14:35,680 Speaker 1: unrest because if they even start to grow at two percent, 244 00:14:36,240 --> 00:14:38,160 Speaker 1: that's going to be a problem in that country, much 245 00:14:38,240 --> 00:14:42,760 Speaker 1: less negative growth. Ever, so they've attached themselves to our 246 00:14:42,800 --> 00:14:45,760 Speaker 1: market in a much bigger way, so that when their 247 00:14:45,840 --> 00:14:50,120 Speaker 1: bubble bursts, we have to help them because they've cost 248 00:14:50,280 --> 00:14:53,760 Speaker 1: us that one point three trillion dollars in pain. That 249 00:14:53,800 --> 00:14:58,200 Speaker 1: doesn't even count the money invested through Hong Kong, which 250 00:14:58,320 --> 00:15:01,560 Speaker 1: there's hundreds or billions of dollars Mortgage, Stanley Private Equity 251 00:15:01,680 --> 00:15:05,680 Speaker 1: and Golden Sacks and Joyce Bank of Pension money that 252 00:15:05,720 --> 00:15:11,120 Speaker 1: are in these Asian funds investing through Hong Kong and China, 253 00:15:11,200 --> 00:15:15,120 Speaker 1: and that doesn't count that the MSCI, the world's largest index, 254 00:15:15,920 --> 00:15:21,920 Speaker 1: they're Emerging Markets index went from twenty five to asiawaited, 255 00:15:22,160 --> 00:15:25,280 Speaker 1: bringing in the Shanghai Exchange and the shen Genis Change, 256 00:15:25,400 --> 00:15:29,000 Speaker 1: the most fraudulent markets in the world to the MSCI index. 257 00:15:29,440 --> 00:15:33,000 Speaker 1: So now you're talking about over two to three trillion 258 00:15:33,040 --> 00:15:38,320 Speaker 1: dollars that we're attached to China when their bubble bursts. 259 00:15:39,080 --> 00:15:44,000 Speaker 1: So this is both money lost to American investors as 260 00:15:44,040 --> 00:15:49,360 Speaker 1: well as money lost for example, of the pension funds 261 00:15:49,480 --> 00:15:53,640 Speaker 1: who are providing the capital to the investors. Well, this 262 00:15:53,800 --> 00:15:57,240 Speaker 1: is in two different scenarios. One, there's a post mortem 263 00:15:57,280 --> 00:16:00,000 Speaker 1: to be done over the last ten years and say 264 00:16:00,040 --> 00:16:02,200 Speaker 1: this is the money lost. I mean there's money's just 265 00:16:02,320 --> 00:16:04,880 Speaker 1: been gained as well, right, so you can say people 266 00:16:04,920 --> 00:16:07,480 Speaker 1: have invested in China and made money on the longside. 267 00:16:07,840 --> 00:16:09,440 Speaker 1: So if you want to talk about the money lost 268 00:16:09,440 --> 00:16:11,280 Speaker 1: over the last ten years, we just talk about direct 269 00:16:11,320 --> 00:16:15,320 Speaker 1: fraud and that's well over one hundred billion dollars. And 270 00:16:15,360 --> 00:16:20,720 Speaker 1: then there's the bigger issue of the potential effect of 271 00:16:21,040 --> 00:16:24,160 Speaker 1: their economy versus our economy because we've allowed ourselves to 272 00:16:24,160 --> 00:16:28,360 Speaker 1: get so entangled over the last ten years that anything 273 00:16:28,360 --> 00:16:31,800 Speaker 1: in a two to three trillion dollars range where we 274 00:16:31,840 --> 00:16:36,000 Speaker 1: have direct investment, I mean pension funds, regular people are 275 00:16:36,040 --> 00:16:38,680 Speaker 1: invested in this way. I'm not talking about treasuries, talking 276 00:16:38,680 --> 00:16:43,040 Speaker 1: about regular investors and people that it's a huge, huge 277 00:16:43,080 --> 00:16:46,440 Speaker 1: effect on the entire country. If we don't do something 278 00:16:46,480 --> 00:16:49,160 Speaker 1: about it now, and you think it'll get bigger, it's 279 00:16:49,200 --> 00:16:51,960 Speaker 1: getting bigger every day, But I mean nothing has been done. 280 00:16:52,440 --> 00:16:56,400 Speaker 1: It's still not illegal to steal from American investors. Next, 281 00:16:56,640 --> 00:16:59,320 Speaker 1: Dan explains what happened when he went to China to 282 00:16:59,440 --> 00:17:10,040 Speaker 1: monitor these companies. Hi, this is new Gingrich. After I 283 00:17:10,080 --> 00:17:13,200 Speaker 1: served as speaker the House, I opened my own business, 284 00:17:13,440 --> 00:17:17,080 Speaker 1: Gingwidge three sixty. As a small business owner, I am 285 00:17:17,119 --> 00:17:22,080 Speaker 1: profit focused and budgeting income, staff, marketing, and sales is 286 00:17:22,160 --> 00:17:25,920 Speaker 1: key to my success. As the adage goes, you get 287 00:17:25,960 --> 00:17:29,640 Speaker 1: what you inspect, not what you expect. If you don't 288 00:17:29,680 --> 00:17:32,960 Speaker 1: know your numbers, you don't know your business. But the 289 00:17:33,080 --> 00:17:36,159 Speaker 1: problem growing businesses have that keeps them from knowing their 290 00:17:36,240 --> 00:17:40,520 Speaker 1: numbers is their Hodgepidge of business systems. They have one 291 00:17:40,600 --> 00:17:45,119 Speaker 1: system for accounting, another for sales, another for inventory, and 292 00:17:45,240 --> 00:17:49,320 Speaker 1: so on. It's just a big inefficient mess, taking up 293 00:17:49,320 --> 00:17:52,920 Speaker 1: too much time and too many resources, and that hurts 294 00:17:52,960 --> 00:17:56,639 Speaker 1: the bottom line. To solve this problem and streamline your books, 295 00:17:56,960 --> 00:18:00,560 Speaker 1: looked to net Suite by Oracle, the business managements software 296 00:18:00,880 --> 00:18:04,119 Speaker 1: that handles every aspect of your business in an easy 297 00:18:04,160 --> 00:18:08,119 Speaker 1: to use cloud platform, giving you the visibility and control 298 00:18:08,600 --> 00:18:12,879 Speaker 1: you need to grow. With NetSuite, you save time, money, 299 00:18:12,880 --> 00:18:18,080 Speaker 1: and unneeded headaches. By managing sales, finance and accounting orders 300 00:18:18,280 --> 00:18:22,760 Speaker 1: and HR instantly right from your desktop or phone. That's 301 00:18:22,760 --> 00:18:27,280 Speaker 1: why NetSuite is the world's number one cloud business system. 302 00:18:27,320 --> 00:18:30,199 Speaker 1: And right now NetSuite is offering you valuable insights with 303 00:18:30,240 --> 00:18:34,160 Speaker 1: the free guide seven Key Strategies to Grow your profits 304 00:18:34,440 --> 00:18:39,080 Speaker 1: at NetSuite dot com slash newt. That's NetSuite dot com 305 00:18:39,119 --> 00:18:43,720 Speaker 1: slash newt to download your free guide seven Key Strategies 306 00:18:43,720 --> 00:18:57,960 Speaker 1: to grow your profits NetSuite dot com slash newt. You 307 00:18:58,000 --> 00:19:01,080 Speaker 1: can't criticize companies in China. There's no such thing as 308 00:19:01,119 --> 00:19:04,400 Speaker 1: freedom of speech. There's criminal defamation, not just civil defamation, 309 00:19:04,400 --> 00:19:08,080 Speaker 1: there's criminal defamation. They put one of our investigators in 310 00:19:08,160 --> 00:19:11,760 Speaker 1: jail for two years because we wrote a report. He 311 00:19:11,800 --> 00:19:14,919 Speaker 1: didn't write it, he just reported back what he saw, 312 00:19:15,280 --> 00:19:18,000 Speaker 1: but they couldn't get to us, so they picked him 313 00:19:18,080 --> 00:19:21,600 Speaker 1: up put him in jail for two years on criminal defamation. 314 00:19:21,760 --> 00:19:25,159 Speaker 1: His trial took fifteen minutes and during the trial, the 315 00:19:25,200 --> 00:19:27,399 Speaker 1: offended company of the attorney was allowed to work with 316 00:19:27,400 --> 00:19:30,800 Speaker 1: the prosecutor during the trial. Is a farce. It's rather 317 00:19:30,840 --> 00:19:34,360 Speaker 1: a different system, isn't it. It definitely is a different system. 318 00:19:34,440 --> 00:19:38,479 Speaker 1: There has to be justice reform, and that is the 319 00:19:38,520 --> 00:19:42,040 Speaker 1: big mistake as we allow them in the who with 320 00:19:42,200 --> 00:19:46,960 Speaker 1: promises of reform, and if you don't have justice reform, 321 00:19:47,080 --> 00:19:50,080 Speaker 1: then you're never going to have this kind of ability 322 00:19:50,119 --> 00:19:54,119 Speaker 1: to invest in the number two economy in the world. 323 00:19:54,240 --> 00:19:56,640 Speaker 1: They're not an emerging market anymore. You're number two economy 324 00:19:56,680 --> 00:20:01,520 Speaker 1: in the world. And no justice, you can't change a 325 00:20:01,600 --> 00:20:06,200 Speaker 1: way of life in that country without entirely changing the system. 326 00:20:06,200 --> 00:20:08,520 Speaker 1: And even then it's going to take time. In China 327 00:20:08,520 --> 00:20:11,720 Speaker 1: and a communist country, they were it was a communist country. 328 00:20:11,760 --> 00:20:14,200 Speaker 1: They were always hiding money. They needed to hide money. 329 00:20:14,200 --> 00:20:16,199 Speaker 1: If you didn't hide money, the government took it. So 330 00:20:16,240 --> 00:20:19,359 Speaker 1: they've got this whole outlook that maybe he's changing a 331 00:20:19,359 --> 00:20:23,280 Speaker 1: bit with a new generation, less hope. But it was 332 00:20:23,320 --> 00:20:26,040 Speaker 1: always about presenting three sets of books, right, you had 333 00:20:26,080 --> 00:20:28,160 Speaker 1: the books you gave the government, the books you had 334 00:20:28,160 --> 00:20:30,040 Speaker 1: for your business, and the books you showed your wife. 335 00:20:30,200 --> 00:20:33,080 Speaker 1: That's the joke in China from the CEOs. It was 336 00:20:33,119 --> 00:20:37,240 Speaker 1: always about corruption. So if you weren't corrupt, you couldn't survive. No, 337 00:20:37,359 --> 00:20:40,120 Speaker 1: you could not. And it was very interesting. What's still 338 00:20:40,119 --> 00:20:44,560 Speaker 1: the case in China. And China has this very circular outlook, right, 339 00:20:44,680 --> 00:20:47,800 Speaker 1: their family is a circle, and that's the strongest circle. 340 00:20:47,840 --> 00:20:51,560 Speaker 1: And outside of that, their local community is a circle, 341 00:20:51,680 --> 00:20:55,080 Speaker 1: and their province in their country, and they will not 342 00:20:55,160 --> 00:20:58,720 Speaker 1: break that circle largely. So what I mean by that 343 00:20:58,880 --> 00:21:03,720 Speaker 1: is when we've investigated companies in China that are fraudulently 344 00:21:03,800 --> 00:21:06,240 Speaker 1: raising money here a lot of times is the way 345 00:21:06,280 --> 00:21:09,520 Speaker 1: this happened. Because I say, one of the frauds that 346 00:21:09,520 --> 00:21:12,199 Speaker 1: we exposed was a large chicken farmer operation, right so, 347 00:21:12,920 --> 00:21:16,040 Speaker 1: and that was fifty million dollars. A Chinese chicken farmer 348 00:21:16,080 --> 00:21:17,840 Speaker 1: doesn't wake up one day know how to defraud the 349 00:21:17,920 --> 00:21:20,960 Speaker 1: US capital markets. They're taught how to do it by us. 350 00:21:21,640 --> 00:21:24,399 Speaker 1: Make no mistake. We have traders among us for money, 351 00:21:25,400 --> 00:21:27,720 Speaker 1: and they'll go to this operator in China and say 352 00:21:28,520 --> 00:21:30,520 Speaker 1: how big is your business? And they'll say, well, okay, 353 00:21:30,600 --> 00:21:33,840 Speaker 1: imagine me holding my hands together small, it's this big. 354 00:21:33,880 --> 00:21:35,480 Speaker 1: How big do you want it to be? And they'll say, well, 355 00:21:35,520 --> 00:21:37,960 Speaker 1: you know, make it bigger, hold your hands out further 356 00:21:38,680 --> 00:21:41,800 Speaker 1: and say, okay, all you need to do is come 357 00:21:41,840 --> 00:21:43,840 Speaker 1: with me to the United States and say your business 358 00:21:43,920 --> 00:21:47,159 Speaker 1: is already this big, and then we're gonna get you 359 00:21:47,160 --> 00:21:50,000 Speaker 1: the money and you'll have that money to make your 360 00:21:50,040 --> 00:21:52,880 Speaker 1: business bigger. Nobody gets hurt because you'll be that big 361 00:21:52,880 --> 00:21:55,080 Speaker 1: in the end, the way the American investors expect you 362 00:21:55,119 --> 00:21:58,840 Speaker 1: to be, even though we're lying in the beginning, and 363 00:21:58,880 --> 00:22:00,600 Speaker 1: that's how they kind of call up them, and you 364 00:22:00,600 --> 00:22:03,159 Speaker 1: can't go to jail and whatever happens, even if you 365 00:22:03,200 --> 00:22:05,760 Speaker 1: get caught, it's not gonna be a problem. The footside 366 00:22:05,760 --> 00:22:08,080 Speaker 1: of that is they're raising that money to make their 367 00:22:08,119 --> 00:22:10,080 Speaker 1: business bigger, so they're going to hurt somebody in their 368 00:22:10,119 --> 00:22:12,440 Speaker 1: local community that compete with them. Right, they're going to 369 00:22:12,480 --> 00:22:16,560 Speaker 1: get bigger, their competition would get smaller. Notionally, thinking if 370 00:22:16,600 --> 00:22:20,119 Speaker 1: you go to that competition and you say, do you 371 00:22:20,160 --> 00:22:22,480 Speaker 1: know what your competition is doing in the United States, 372 00:22:23,119 --> 00:22:26,920 Speaker 1: they're lying, cheating, and stealing from American investors to make 373 00:22:26,920 --> 00:22:29,240 Speaker 1: their company bigger and puts you out of business. Why 374 00:22:29,240 --> 00:22:31,320 Speaker 1: don't you work with us and come up publicly and 375 00:22:31,359 --> 00:22:33,920 Speaker 1: talk about how they're lying. They will not do it. 376 00:22:34,400 --> 00:22:36,439 Speaker 1: They would rather go out of business. And is that 377 00:22:36,520 --> 00:22:39,680 Speaker 1: because the state will punish them, the community will punish them. 378 00:22:39,920 --> 00:22:41,879 Speaker 1: There would be a pariah in the community. You just 379 00:22:41,920 --> 00:22:44,840 Speaker 1: don't do it. It's their own kind of America I 380 00:22:44,840 --> 00:22:49,320 Speaker 1: don't know. I mean, you would think that if Firestone 381 00:22:49,359 --> 00:22:52,359 Speaker 1: is lying about some of their tires and pricing and 382 00:22:52,600 --> 00:22:55,439 Speaker 1: rubber and things of that nature, that Goodyear would be 383 00:22:55,480 --> 00:22:59,280 Speaker 1: happy to say you can't do that and publicly talk 384 00:22:59,320 --> 00:23:02,919 Speaker 1: about that. That will not happen in China. They'll go 385 00:23:02,960 --> 00:23:05,240 Speaker 1: out of business before they tell on one of their competitors. 386 00:23:05,800 --> 00:23:08,000 Speaker 1: What are you doing now? I understand you've created a 387 00:23:08,000 --> 00:23:12,240 Speaker 1: new company. We were put into an extraordinary situation about 388 00:23:12,359 --> 00:23:16,679 Speaker 1: exposing corruption. This has become my life. I mean, for 389 00:23:16,800 --> 00:23:19,440 Speaker 1: fifteen years I worked in the corporate world for a 390 00:23:19,480 --> 00:23:23,160 Speaker 1: great American company and I was very satisfied with that job. 391 00:23:23,200 --> 00:23:25,800 Speaker 1: And they're good people then inform me in a lot 392 00:23:25,800 --> 00:23:29,520 Speaker 1: of ways operationally, but in my investing experience, this is 393 00:23:29,560 --> 00:23:32,920 Speaker 1: who I am. And I've really not found something more 394 00:23:33,000 --> 00:23:37,159 Speaker 1: gratifying than fighting for the truth and hopefully having an 395 00:23:37,160 --> 00:23:41,680 Speaker 1: effect and helping fellow Americans. Once you've brought over the line, 396 00:23:41,760 --> 00:23:45,600 Speaker 1: brought over the wire, and you see from meeting with 397 00:23:45,640 --> 00:23:49,560 Speaker 1: our counterparts how important it is for them to win 398 00:23:50,720 --> 00:23:53,119 Speaker 1: to it not to be a win win situation. To 399 00:23:53,200 --> 00:23:57,480 Speaker 1: be at they win situation, you feel a call to action, 400 00:23:57,520 --> 00:24:00,679 Speaker 1: At least I do. So this is important to me, 401 00:24:00,680 --> 00:24:04,360 Speaker 1: and I started my own firm called wolf Pack Research, 402 00:24:05,560 --> 00:24:08,960 Speaker 1: and that's kind of based on a joke of what 403 00:24:09,000 --> 00:24:11,280 Speaker 1: people think short sellers are right. They think we're some 404 00:24:11,400 --> 00:24:16,360 Speaker 1: kind of wolf pack, which is fine, because the ecosystem 405 00:24:16,560 --> 00:24:20,000 Speaker 1: needs wolf pack to take down bad and dying businesses 406 00:24:20,880 --> 00:24:24,480 Speaker 1: or keep that ecosystem strong and clear. So it's about 407 00:24:24,560 --> 00:24:28,119 Speaker 1: keeping the financial ecosystem strong and clear. Well, listen, I 408 00:24:28,200 --> 00:24:30,400 Speaker 1: want to thank you. I think you are the kind 409 00:24:30,440 --> 00:24:34,720 Speaker 1: of entrepreneur and the kind of citizen that has made 410 00:24:34,760 --> 00:24:37,720 Speaker 1: this country unique. And I think with the courage and 411 00:24:37,800 --> 00:24:41,040 Speaker 1: drive and determination of people like you who will continue 412 00:24:41,080 --> 00:24:43,520 Speaker 1: that way. So I'm very grateful that you spend time 413 00:24:43,520 --> 00:24:45,040 Speaker 1: with us, and I think it will be a further 414 00:24:45,080 --> 00:24:49,240 Speaker 1: step towards educating the American people and through them, educating 415 00:24:49,240 --> 00:24:54,160 Speaker 1: the Congress. I also too, thank you, mister speaker. When 416 00:24:54,160 --> 00:24:58,439 Speaker 1: we come back, American investor Ray Snayder shares his story 417 00:24:58,440 --> 00:25:20,080 Speaker 1: of investing and the Electric Motor Company public pension and 418 00:25:20,160 --> 00:25:24,760 Speaker 1: retirement funds lost and estimated fourteen billion dollars to Chinese 419 00:25:24,800 --> 00:25:28,200 Speaker 1: reverse merger frauds. Most of the people who lost money 420 00:25:28,200 --> 00:25:31,800 Speaker 1: in their investments in these Chinese companies were average Americans 421 00:25:32,240 --> 00:25:35,680 Speaker 1: saving for retirement. They looked at the financials and these 422 00:25:35,720 --> 00:25:38,520 Speaker 1: companies and believed what they saw and thought they were 423 00:25:38,560 --> 00:25:42,280 Speaker 1: making a solid investment. You're about to meet one investor 424 00:25:42,560 --> 00:25:46,320 Speaker 1: who's going to tell you his story, Race Nater, thanks 425 00:25:46,359 --> 00:25:51,120 Speaker 1: for being a news world. What first attracted you to 426 00:25:51,160 --> 00:25:54,439 Speaker 1: invest in a Chinese company? Well, you know, I was 427 00:25:54,520 --> 00:25:58,840 Speaker 1: just looking around at options, and I thought, China is 428 00:25:58,880 --> 00:26:04,000 Speaker 1: a growing rope the economy, and my impression was this 429 00:26:04,040 --> 00:26:09,080 Speaker 1: company had good reviews that it looked like over the 430 00:26:09,440 --> 00:26:13,160 Speaker 1: longer term, it was going to be doing very well. 431 00:26:13,720 --> 00:26:18,000 Speaker 1: That is the first Chinese company I had invested in. 432 00:26:18,400 --> 00:26:23,240 Speaker 1: I'd always been investing in American and European companies, but 433 00:26:23,280 --> 00:26:26,840 Speaker 1: then I had this opportunity and I thought, well, China 434 00:26:27,000 --> 00:26:31,119 Speaker 1: is really growing. And my sister was teaching English at 435 00:26:31,160 --> 00:26:34,359 Speaker 1: a teacher's colleague in China at the time, and I 436 00:26:34,520 --> 00:26:37,840 Speaker 1: just became kind of interested in China and thought, well, 437 00:26:37,880 --> 00:26:42,760 Speaker 1: I'll invest in that firm. And I did, thinking that 438 00:26:42,920 --> 00:26:48,119 Speaker 1: everything I was reading was above board. It was not 439 00:26:48,200 --> 00:26:51,280 Speaker 1: just a Chinese company, but there were also a number 440 00:26:51,280 --> 00:26:55,760 Speaker 1: of Americans involved as middlemen. Part of this was driven 441 00:26:55,800 --> 00:27:01,280 Speaker 1: by Roth Capital issuing a buy recommendation. Can you explain first, 442 00:27:01,280 --> 00:27:04,840 Speaker 1: how did you find Roth Capital and had they been 443 00:27:04,880 --> 00:27:09,520 Speaker 1: successful prior to this with their recommendations. I had never 444 00:27:09,600 --> 00:27:13,560 Speaker 1: been familiar with Roth Capitol until I became involved with 445 00:27:13,840 --> 00:27:18,960 Speaker 1: China Electric Motor. They are an organization that is hired 446 00:27:19,160 --> 00:27:25,080 Speaker 1: by shady companies to promote their stock when they have 447 00:27:25,520 --> 00:27:28,400 Speaker 1: no other way to promote it. I was not familiar 448 00:27:28,440 --> 00:27:32,120 Speaker 1: with Roth Capitol at all. Now, of course, I've learned 449 00:27:32,160 --> 00:27:37,600 Speaker 1: a lot more. Often what happens is these organizations are 450 00:27:37,680 --> 00:27:41,879 Speaker 1: contracted to promote the company, and the way they are 451 00:27:42,000 --> 00:27:48,440 Speaker 1: paid is by stock in the company, And so they 452 00:27:48,480 --> 00:27:52,840 Speaker 1: will get shares of the company for promoting the company, 453 00:27:53,240 --> 00:27:56,919 Speaker 1: and then they turn around and sell those shares on 454 00:27:56,960 --> 00:28:00,359 Speaker 1: the market, and that's how they get paid. They aren't 455 00:28:00,359 --> 00:28:04,760 Speaker 1: paid dollars from the Chinese company, They're just paid with shares. 456 00:28:05,359 --> 00:28:11,480 Speaker 1: And so I've learned somewhat more about Roth and there 457 00:28:11,520 --> 00:28:17,479 Speaker 1: are other similar organizations, and there are also accountants in 458 00:28:17,520 --> 00:28:21,920 Speaker 1: the United States who work for and promote these companies 459 00:28:22,400 --> 00:28:28,120 Speaker 1: with their fraudulent accounting practices. The process whether you just described, though, 460 00:28:28,680 --> 00:28:33,080 Speaker 1: does sound like that would give them an incentive to 461 00:28:33,080 --> 00:28:37,000 Speaker 1: find a company that's going to grow and survive because 462 00:28:37,720 --> 00:28:40,200 Speaker 1: there returns all in the stock of that company. So 463 00:28:40,720 --> 00:28:45,720 Speaker 1: if the company collapses, they lose ground too. No, they 464 00:28:45,840 --> 00:28:49,960 Speaker 1: get shares in the company, they turn around and sell 465 00:28:50,000 --> 00:28:54,760 Speaker 1: those shares on the open market when the company appears 466 00:28:54,840 --> 00:28:58,520 Speaker 1: to be viable and is doing well. They don't wait 467 00:28:58,680 --> 00:29:02,800 Speaker 1: until the company falls apart. They'd take their shares, put 468 00:29:02,800 --> 00:29:06,520 Speaker 1: them on the market, sell them and get their money. 469 00:29:07,120 --> 00:29:11,480 Speaker 1: And that's before the firm is discovered to be a 470 00:29:11,520 --> 00:29:15,640 Speaker 1: shell company. I see. So in essense, they want to 471 00:29:15,720 --> 00:29:22,880 Speaker 1: churn what they're doing in order to be able to 472 00:29:22,920 --> 00:29:27,120 Speaker 1: move the stock and do it before the company collapses. 473 00:29:27,600 --> 00:29:30,720 Speaker 1: Of course, they want out of the company because they 474 00:29:30,760 --> 00:29:35,000 Speaker 1: know the company's going to collapse, so they sell their shares, 475 00:29:35,200 --> 00:29:39,120 Speaker 1: pocket their money, and the rest of us are still 476 00:29:39,160 --> 00:29:42,600 Speaker 1: holding the bag, so to speak. Right, how much money 477 00:29:42,600 --> 00:29:46,000 Speaker 1: did you lose altogether and how did that impact on 478 00:29:46,040 --> 00:29:49,640 Speaker 1: your retirement savings. Part of the problem was mine in 479 00:29:49,760 --> 00:29:54,480 Speaker 1: that I ended up not staying as diversified as I 480 00:29:54,560 --> 00:29:58,680 Speaker 1: should have. I moved quite a bit of my savings 481 00:29:59,480 --> 00:30:04,680 Speaker 1: in China Electric Motor because they seemed to be doing well. 482 00:30:04,680 --> 00:30:09,120 Speaker 1: The quarterly reports were coming at the annual reports were 483 00:30:09,160 --> 00:30:13,600 Speaker 1: coming at that things were looking very very good. And 484 00:30:14,200 --> 00:30:17,920 Speaker 1: the bottom line is, after it was all said and done, 485 00:30:19,080 --> 00:30:22,719 Speaker 1: I had lost about one hundred and fifty thousand dollars 486 00:30:22,840 --> 00:30:26,640 Speaker 1: in China Electric Motor, which is a lot for me. 487 00:30:27,600 --> 00:30:29,680 Speaker 1: You know, my wife and I don't have a lot 488 00:30:29,720 --> 00:30:33,760 Speaker 1: of money. We're kind of poor folks who work all 489 00:30:33,760 --> 00:30:38,680 Speaker 1: the time. And that came out of our retirement plan. Wow. 490 00:30:39,080 --> 00:30:42,280 Speaker 1: So that puts you back considerable number of years then, 491 00:30:42,280 --> 00:30:45,520 Speaker 1: and you're planning for being able to retire full time. 492 00:30:46,400 --> 00:30:50,240 Speaker 1: That's true. And what you might want to know, I'm 493 00:30:50,360 --> 00:30:55,600 Speaker 1: seventy one years old, and so I probably should be retired. 494 00:30:55,880 --> 00:31:00,160 Speaker 1: I probably should be doing something else other than what 495 00:31:00,240 --> 00:31:04,240 Speaker 1: I'm doing. But I'm still working a lot because well, 496 00:31:04,280 --> 00:31:08,320 Speaker 1: I just don't have the savings that I thought I 497 00:31:08,400 --> 00:31:11,520 Speaker 1: would have at this point in my life. Now, what 498 00:31:11,600 --> 00:31:14,760 Speaker 1: happened to the company in China? There was no company 499 00:31:14,800 --> 00:31:17,920 Speaker 1: in China as far as I can tell. All that 500 00:31:18,040 --> 00:31:22,520 Speaker 1: I know was that there was a shell company that 501 00:31:22,600 --> 00:31:27,080 Speaker 1: made it appear to be a company China Electric Motor 502 00:31:27,640 --> 00:31:31,920 Speaker 1: in China. Whoever was involved in that, and there were 503 00:31:31,960 --> 00:31:34,719 Speaker 1: a number of different names, but I don't think we 504 00:31:34,800 --> 00:31:37,600 Speaker 1: ever were able to get to them. But there was 505 00:31:37,640 --> 00:31:41,960 Speaker 1: an investigation by the lawyers who filed a class action 506 00:31:42,040 --> 00:31:46,080 Speaker 1: lawsuit and they determined who it was that was putting 507 00:31:46,160 --> 00:31:52,160 Speaker 1: out all of the fraudulent information that led to individuals 508 00:31:52,240 --> 00:31:58,240 Speaker 1: investing in the shell company. Were the Chinese themselves basically 509 00:31:58,280 --> 00:32:03,000 Speaker 1: innocent or day going along with the shell game. I'm 510 00:32:03,040 --> 00:32:08,200 Speaker 1: sure that the Chinese individuals who were heading up this 511 00:32:08,280 --> 00:32:12,240 Speaker 1: company were not innocent. They had a scam going, and 512 00:32:12,360 --> 00:32:17,120 Speaker 1: what they did is they just hired American pr and 513 00:32:17,280 --> 00:32:21,680 Speaker 1: accountants to promote their scheme. There was really no way 514 00:32:21,840 --> 00:32:25,640 Speaker 1: for us to get the China get into the pockets 515 00:32:25,680 --> 00:32:29,520 Speaker 1: of the Chinese. So do we need to change our 516 00:32:29,560 --> 00:32:33,800 Speaker 1: fundamental laws in that sense to be able to monitor 517 00:32:33,840 --> 00:32:37,760 Speaker 1: them more carefully and to make them potentially collectible when 518 00:32:37,760 --> 00:32:41,440 Speaker 1: they do things that are this clearly bad. Yes, But 519 00:32:41,520 --> 00:32:46,200 Speaker 1: I think going back one step further, before a Chinese 520 00:32:46,280 --> 00:32:52,520 Speaker 1: company or any company is allowed to list it stock 521 00:32:53,160 --> 00:32:59,320 Speaker 1: an American stock exchange or available for Americans to invest in, 522 00:33:00,200 --> 00:33:03,240 Speaker 1: there needs to be a vetting process. I think the 523 00:33:03,440 --> 00:33:07,680 Speaker 1: security is an exchange commission needs to make sure is 524 00:33:07,760 --> 00:33:12,280 Speaker 1: this in fact a valid company or no? Because if 525 00:33:12,280 --> 00:33:15,480 Speaker 1: it's not a valid company, then it should not be 526 00:33:15,600 --> 00:33:19,800 Speaker 1: made available to American investors. Do you think, I mean, 527 00:33:19,840 --> 00:33:22,840 Speaker 1: would you discourage people from investing in China or would 528 00:33:22,840 --> 00:33:26,000 Speaker 1: you argue that we should have our own government be 529 00:33:26,080 --> 00:33:29,440 Speaker 1: much more aggressive health How would you stop the next 530 00:33:29,480 --> 00:33:32,520 Speaker 1: cycle of people from going through this? I would just 531 00:33:32,760 --> 00:33:39,760 Speaker 1: suggest that American investors do much more investigation before they 532 00:33:40,080 --> 00:33:45,080 Speaker 1: invest in Chinese companies number one. But I still think 533 00:33:45,360 --> 00:33:50,280 Speaker 1: that SEC should do more to protect the investor. I 534 00:33:50,400 --> 00:33:54,920 Speaker 1: just don't think that firms that are nonexistent, that are 535 00:33:54,920 --> 00:33:59,720 Speaker 1: shell companies, should be allowed to promote their firm to 536 00:34:00,080 --> 00:34:05,720 Speaker 1: investors when there's really nothing there to invest in. So 537 00:34:05,800 --> 00:34:08,759 Speaker 1: I think it both calls for due diligence on the 538 00:34:08,800 --> 00:34:12,040 Speaker 1: part of the investor, But I think the SEC needs 539 00:34:12,040 --> 00:34:16,279 Speaker 1: to be more diligent also, and that may require Congress 540 00:34:16,480 --> 00:34:20,480 Speaker 1: to change the lawsome Maybe the SEC just needs to 541 00:34:20,520 --> 00:34:24,800 Speaker 1: have more teeth so that it can go after and 542 00:34:25,440 --> 00:34:29,319 Speaker 1: look at firms before they're listed on the stock exchanges. 543 00:34:29,960 --> 00:34:32,200 Speaker 1: You are very helpful, right, and I think you help 544 00:34:32,320 --> 00:34:38,040 Speaker 1: educate the country. Well. Thank you. In my new book 545 00:34:38,560 --> 00:34:43,239 Speaker 1: Trump Versus China, Facing America's Great as Threat, I describe 546 00:34:43,280 --> 00:34:47,480 Speaker 1: in detail the new era of competition with communist ruled 547 00:34:47,560 --> 00:34:51,480 Speaker 1: China that the United States now faces. It impacts every 548 00:34:51,480 --> 00:34:55,239 Speaker 1: American and it is important to understand and recognize how 549 00:34:55,239 --> 00:34:57,759 Speaker 1: we got to where we are today and what we 550 00:34:57,840 --> 00:35:00,759 Speaker 1: must do as a country to survive. I encourage you 551 00:35:00,800 --> 00:35:04,719 Speaker 1: to pick up a copy of Trump Versus China, available 552 00:35:04,840 --> 00:35:14,960 Speaker 1: October twenty second. Thank you to my guests Dan David 553 00:35:15,000 --> 00:35:18,480 Speaker 1: and Ray Snader. You can learn more about Chinese companies 554 00:35:18,719 --> 00:35:21,680 Speaker 1: trading on US stock exchanges and get a link to 555 00:35:21,719 --> 00:35:25,920 Speaker 1: the documentary The China Hustle on our show page at 556 00:35:26,000 --> 00:35:30,960 Speaker 1: newtsworld dot com. Newtsworld is produced by Westwood One. Our 557 00:35:31,040 --> 00:35:35,000 Speaker 1: executive producers Debbie Myers, and our producer is Gornsey Slut. 558 00:35:35,560 --> 00:35:39,800 Speaker 1: Our editor is Robert Bowski, and our researcher is Rachel Peterson. 559 00:35:40,360 --> 00:35:43,759 Speaker 1: Our guest booker is Grace Davis. The artwork for the 560 00:35:43,800 --> 00:35:48,080 Speaker 1: show was created by Steve Penley. The music was composed 561 00:35:48,080 --> 00:35:51,840 Speaker 1: by Joey Salvia. Special thanks to the team at Gingwich, 562 00:35:51,880 --> 00:35:56,080 Speaker 1: Sweet sixty and Westwood Ones, John Wurdock and Robert Mathers. 563 00:35:57,040 --> 00:36:00,640 Speaker 1: Please email me with your comments at newt at newtsworld 564 00:36:00,680 --> 00:36:04,279 Speaker 1: dot com. If you've been enjoying Newtsworld, I hope you'll 565 00:36:04,280 --> 00:36:07,319 Speaker 1: go to Apple Podcasts and both rate us with five 566 00:36:07,400 --> 00:36:11,080 Speaker 1: stars and give us a review so others can learn 567 00:36:11,160 --> 00:36:19,239 Speaker 1: what it's all about. On the next episode of Newtsworld, 568 00:36:19,600 --> 00:36:23,400 Speaker 1: we're continuing our three part series on China, exploring what 569 00:36:23,520 --> 00:36:25,880 Speaker 1: it's like to live in modern day China and a 570 00:36:25,960 --> 00:36:31,600 Speaker 1: communist to tolitarian society. I'm Newt Kangwage. This is Newsworld, 571 00:36:41,000 --> 00:36:43,360 Speaker 1: the Westwood One podcast Network.