Out Fox The $treet

Puda Coal (PUDA) is a coal mine consolidator and met coal washer in China that has been hit by fraud allegations from a noted short seller. At question is whether the Chairman of PUDA illegally transferred shares from a subsidiary 90% owned by PUDA to himself, then sold 49% of the shares to CITIC (China govt fund) and further pledged the other 51% for a massive loan that could threaten to bankrupt the company. With all of the recent news regarding fraud amongst China Reverse Mergers, the stock plummeted 50% within a week .  The company issued a press release prior to the stock opening on the 11th that the allegations might have some validity and announced they were launching an investigation. The stock was halted on the 11th and has yet to reopen. Also the margin requirements were raised to 100% which means the stock can no longer be margined. Although the Opportunistic Arbitrage model heavily relies on margin, the model hasn't been impacted with this increased requirement since t...

While the news seemed horrible today with the SEC announcing fraud charges against Goldman Sachs (GS), the news is already turning very questionable for the SEC. Its difficult to fathom how the SEC will be able to isolate one transaction from GS and get that to stick. All of the parties in this deal were very sophisticated and knowledgable. No indication exists that they were intentionally misled. Just about everybody thought the housing market would never decline and hence irrational investments were made. If anything, the rating agencies and regulators remain as the main culprits for the blowup of the markets not GS. After the bell, news has come out that not only did GS lose $90M on the questioned deal, but Deutsche Bank (DB) lost $500M. Both banks were instrumental in working with John Paulson to structure these deals that he shorted. The SEC believes the intent was to defruad the buyers in this case. According to GS they lost $90M in this transaction because they accepted residu...