US securities regulators on Wednesday set fines against two Chinese executives accused of looting formerly US-listed Puda Coal at more than $250 million.
The Securities and Exchange Commission set the default judgement against Zhao Ming, Puda's chairman, and former chief executive Zhu Liping.
The agency said the pair already stripped the firm of its main asset before Puda raised $116 million in two US public offerings in 2010.
While investors soaked up the offerings based on the potential of Puda's ostensibly 90 percent-owned, profit-generating mining subsidiary Shanxi Coal, Zhao had already secretly transferred Shanxi's shares to himself a year earlier, according to the SEC case filed in 2012.
Zhao had then handed 49 percent of Shanxi Coal over to Citic Trust, a unit of the giant Chinese investment bank Citic, in exchange for 1.2 billion preferred shares in a new coal investment fund.
Zhao also pledged 51 percent of Shanxi's assets to Citic for a $370 million loan.
"Zhao and Zhu perpetrated a massive fraud on Puda's public shareholders by effectively stealing and selling Puda's operating subsidiary," the SEC said.
"At the same time that Citic Trust was effectively selling interests in the coal company to Chinese investors, Zhao and Zhu were still telling US investors that Puda owned a 90 percent stake in that company."
The result was that Puda's share value was wiped out, with heavy losses for investors.
The fines were issued as a default judgement, which usually comes when accused parties don't defend themselves against charges.
Puda was one of a number of Chinese companies that became traded on US markets over the past decade via backdoor listings -- the company takes over another usually moribund firm already traded on the market.
Puda shares began trading on the Amex exchange in 2005 via such a move.
When its key income-generating unit Shanxi Coal was chosen in 2009 to help the government consolidate smaller coal mines in Shanxi province, Puda went to investors for more cash ostensibly to fund the growth.
But the SEC said Zhao with the help of Zhu had already quietly stripped Shanxi Coal from Puda, leaving the company an empty shell.