Barron’s interviews Carson Block, founder of Muddy Waters Research, about fraudulent Chinese reverse mergers (emphasis added):
Carson Block has spent the past five years seeking his fortune in China. With some Mandarin under his belt, he practiced law for a year, conducted research for hedge funds and for his father, a U.S. investor, and even started a self-storage venture. But Block, 34, seems to have hit his stride with Muddy Waters Research, an online service he launched in June 2010 to expose what he describes as misstatements and fraud at small Chinese companies trading in the U.S.
After Block published his first research report last summer, claiming Orient Paper (ONP) had overstated revenue and misappropriated funds, investors lambasted his tactics and credibility, and the company disputed his findings. Undaunted, he has since issued negative reports on two more Chinese companies.
Investors who sold shares of these companies short after each report was published have reaped double-digit returns. RINO International (RINO), the subject of Block’s second report, has admitted to some of the irregularities Muddy Waters cited. Its stock was delisted last fall.
Read the full article here