Kangmei Pharmaceutical: CSRC fraud penalties, China's first securities class action and restructuring
Kangmei Pharmaceutical: CSRC fraud penalties, China's first securities class action and restructuring: a public-record watch file compiled by Falling Shares Intelligence from filings and exchange disclosures, as of 2026-11-09. In August 2019 the China Securities Regulatory Commission (CSRC) said Kangmei had overstated cash by RMB88.7bn and revenue by RMB29bn over 2016-2018; a final fine on the company followed in May 2020.
From the securities regulator's 2019 finding of inflated cash and revenue to a 2021 class-action judgment, a bankruptcy restructuring and a 2026 ruling against its sponsor: what the record shows.
Falling Shares Intelligence, Edited by Wung Thomas, Editor-in-Chief. As of .
Summary
- In August 2019 the China Securities Regulatory Commission (CSRC) said Kangmei had overstated cash by RMB88.7bn and revenue by RMB29bn over 2016-2018; a final fine on the company followed in May 2020.
- Its former chairman was sentenced to 12 years in prison in November 2021 and the sentence was upheld on appeal in January 2022.
- A Guangzhou court ordered about RMB2.46bn in compensation to investors in China's first securities class action; Caixin reported in May 2022 that the sum had been paid under the company's reorganisation.
- Control passed to a Guangdong state-backed vehicle in 2020 and a reorganisation plan was approved in November 2021; the company remains listed in Shanghai.
Key figures
| Cash overstated (CSRC, 2016-2018) | RMB88.7bn (Revenue overstated by RMB29bn, per the 2019 CSRC notice as reported) |
|---|---|
| Class-action compensation | RMB2.46bn (Judgment of 12 Nov 2021; Caixin reported it paid in May 2022) |
| Prison sentence, former chairman | 12 years (Final on appeal, Jan 2022; fine of RMB1.2m) |
The securities regulator's findings
CSRC announces penalties and describes the fraud
The CSRC fined 22 people, including top executives, a combined RMB5.95m and imposed lifetime securities-market bans on three senior officials. It said Kangmei fabricated invoices, tax receipts and deposit slips, overstated cash by RMB88.7bn and revenue by RMB29bn and operating profit by RMB4.1bn over 2016-2018, and did not disclose RMB11.6bn provided to its controlling shareholder and affiliates. The CSRC described the conduct as premeditated, organised, long-term and systematic. (16 Aug 2019)
Final penalty on the company
A governance commentary reports that the CSRC fined Kangmei the maximum RMB600,000 for falsifying its financial reports in May 2020. (May 2020)
Auditor penalised
The same commentary reports that in February 2021 the CSRC ordered Kangmei's auditor to pay about RMB57m, saying it falsified records of audit field visits and relied on forged bank documents in its 2016 audit. Caixin names the firm as Guangdong Zhengzhong Pearl River Accounting Firm, which audited Kangmei for 18 years from 2001. (Feb 2021)
Criminal case and investor class action
Former chairman convicted and sentenced
The former chairman was taken into police custody in July 2020 and sentenced in November 2021 to 12 years and a RMB1.2m fine for market manipulation, failure to disclose important information and bribery. Caixin reported that the Guangdong Higher People's Court rejected his appeal and issued a final ruling in January 2022. (Nov 2021 - Jan 2022)
Guangzhou court orders compensation in class action
The Guangzhou Intermediate People's Court ordered compensation of about RMB2.46bn after a representative action brought through the China Securities Investor Service Center, the first of its kind. Caixin reported 52,037 investors affected; the commentary reports 55,326 eligible investors who bought between 20 April 2017 and 16 October 2018. Caixin reports the former chairman and several executives were held fully liable, with the auditor and a partner also held 100% liable. (12 Nov 2021)
Sponsor ordered to compensate investors
A June 2026 Caixin profile reports that the Guangzhou Intermediate People's Court recently ordered GF Securities, Kangmei's 2001 IPO sponsor, to compensate investors. (May 2026)
Restructuring and compensation paid
Change of control and reorganisation plan
Control passed on 3 September 2020 from the former controlling shareholder to a Guangdong government-controlled vehicle. Creditors applied for bankruptcy reorganisation in April 2021, and in November 2021 a Guangdong court approved a plan involving a RMB6.5bn injection from five investors including state-owned Guangzhou Pharmaceutical Holdings. (Sep 2020 - Nov 2021)
Compensation paid to more than 52,000 investors
Caixin reported that Kangmei paid the RMB2.46bn under its reorganisation plan and that more than 52,000 investors received cash, according to a CSRC vice chairman at a briefing. Caixin said this closed China's first securities class action against a fraudulent issuer. (May 2022)
Graduated liability for independent directors
The commentary reports that the court set partial liability for several directors and supervisors at 20%, for three independent directors at 10% and for two others at 5%, rather than full joint liability. (12 Nov 2021)
Standard
This file compiles regulator and court documents, exchange filings, company statements and published reporting about Kangmei Pharmaceutical Co., Ltd.. Allegations are attributed to those who made them. An investigation is not a charge, a charge is not a finding, and nothing here is a finding of wrongdoing unless a competent authority has made one. Here, the securities regulator and Chinese courts have made findings, which are reported as findings of those bodies; the company has since been restructured under new control. Individuals are not named unless an official document names them and they are central; otherwise roles are used. This is news coverage for information only, not investment advice.
Right of reply
Kangmei Pharmaceutical Co., Ltd., and anyone named in a record cited here, can send corrections or comments to info@fallingshares.com (or directly to the Editor-in-Chief, Wung Thomas, at wungthomas@fallingshares.com). Material responses will be published alongside the relevant entry.