Phosphate fertilizer giant Cilt and others face fines exceeding 18 million yuan; stocks will be marked "ST"! Former chairman set up a "small treasury," revealing a major case of false records

On March 27, Si Er Te (SZ002538, stock price 7.24 yuan, market value 6.18 billion yuan) announced that the company and several related personnel are facing a heavy fine from the Anhui Securities Regulatory Bureau.

The reporter from the Daily Economic News noted that Si Er Te and the related parties may face fines totaling up to 18.6 million yuan. The then chairman Jin Guoqing and the then general manager Jin Zhenghui may both face a five-year ban from the securities market.

Moreover, the company’s stock will be subject to other risk warnings starting from the opening of the market on March 31, 2026, and the stock abbreviation will be changed to “ST Si Te.”

Pulling out the radish brings out the mud

The trigger for the aforementioned case was actually an internal “embezzlement” case within Si Er Te.

At the end of 2023, during an internal self-examination, Si Er Te discovered that some management personnel were suspected of using their positions to embezzle a large amount of property from the company’s wholly-owned subsidiary, Guizhou Lufa Industrial Co., Ltd. (hereinafter referred to as “Guizhou Lufa”). In the face of multiple discussions from the company, the relevant personnel not only refused to cooperate with the self-examination but also resigned one after another.

On January 17, 2024, Si Er Te officially reported the case to the Ningguo City Public Security Bureau and released an announcement on January 18, 2024, regarding the report to the public security authorities.

As the public security authorities intervened in the investigation, the hidden darkness within Si Er Te was gradually exposed. On September 29, 2025, Si Er Te received a “Notice of Transfer for Review and Prosecution” delivered by the Xuancheng City Public Security Bureau, and the case was officially transferred to the Xuancheng City People’s Procuratorate for review and prosecution. Based on the information the company has, this transfer for review and prosecution involves former directors, senior management personnel, as well as some employees of the company and staff from related securities service intermediary institutions.

According to Si Er Te’s announcement, the main criminal facts involving the aforementioned personnel include: suspected of using their positions to embezzle large amounts of property from the company and its wholly-owned subsidiary Guizhou Lufa for a long time; suspected of fabricating urea procurement transactions to transfer company funds out, and then fabricating sales of organic fertilizers to return part of the funds and fraudulently obtain government subsidies; suspected of accepting fraudulent value-added tax invoices during the process of fabricating urea procurement transactions; suspected of bribery by non-state personnel to implement the aforementioned criminal acts.

During the investigation of the case, Si Er Te faced the risk of being held criminally liable as a unit. However, in January 2026, Si Er Te received a “Non-Prosecution Decision” delivered by the Xuanzhou District People’s Procuratorate of Xuancheng City, Anhui Province.

The procuratorial authorities found through legal review that the then chairman of Si Er Te, Jin Guoqing, conspired to extract funds into a private “slush fund,” arranging for others to sign false procurement contracts for urea with a certain agricultural materials trading company in Anhui without any real goods transactions to extract funds, and let these companies issue surplus value-added tax invoices to Si Er Te. At the same time, Jin Guoqing and others manufactured false sales flow for organic fertilizers to extract funds and fraudulently obtained government subsidies, and they also engaged in similar behaviors of extracting funds through fabricated contracts from January 2020 to February 2022.

The procuratorate believed that Si Er Te did not aim to defraud state tax funds by issuing fraudulent value-added tax invoices, thus it did not constitute a crime, and decided not to prosecute Si Er Te.

Total fines may exceed 18 million yuan

Although Si Er Te was spared prosecution, the related behaviors of its executives directly led to false records in the company’s periodic reports, which attracted the high attention of the securities regulatory department.

In September 2025, Si Er Te was investigated by the China Securities Regulatory Commission for suspected violations of information disclosure. On March 27, 2026, the shoe finally dropped, as the Anhui Securities Regulatory Bureau issued the “Administrative Penalty and Market Ban Advance Notice” and the decision to order corrective measures against Anhui Si Er Te Fertilizer Co., Ltd., Anhui Ningguo Agricultural Production Materials Co., Ltd., and Xuancheng Dongchen Health Industry Management Co., Ltd.

It was found that the false records existing in Si Er Te mainly fall into two categories. First, fabricated engineering construction business. In 2021, Si Er Te’s wholly-owned subsidiary Guizhou Lufa and the Xi’an Certain Jie Construction Group Co., Ltd. Kaiyang Branch fabricated false contracts and settlement documents for trackless tunneling and fabricated tunneling business. In addition, Guizhou Lufa also signed engineering construction contracts with three companies, including Zhejiang Certain Xiangjian Construction Group Co., Ltd., Wenzhou Certain Tai Construction Engineering Co., Ltd., and Fujian Certain Hui Construction Group Co., Ltd., but these three companies did not provide engineering business services, thus constituting false engineering construction business.

Second, false urea procurement and organic fertilizer sales. Si Er Te falsely procured urea from Anhui Certain He Agricultural Materials Co., Ltd. and Fengyang County Certain Shun Agricultural Materials Co., Ltd., falsely inflating operating costs. At the same time, the wholly-owned subsidiary falsely sold organic fertilizers to 17 distributors, falsely inflating operating income.

In summary, Si Er Te inflated total profits by about 36.35 million yuan in 2021, accounting for 6.76% of the total profits disclosed during that period; in 2023, it falsely reduced total profits by about 17.35 million yuan, accounting for 10.35% of the total profits disclosed during that period.

In response, the Anhui Securities Regulatory Bureau proposed to impose fines: ordering Si Er Te to correct its actions, issuing a warning, and imposing a fine of 6 million yuan; issuing warnings and imposing fines of 3 million yuan each on the then chairman Jin Guoqing and the then general manager cum total commander of Guizhou Lufa Jin Zhenghui; imposing a warning and a fine of 2 million yuan on Fang Jun; issuing warnings and imposing fines of 1.5 million yuan each on Wen Jibing and Huang Xili; issuing warnings and imposing fines of 800,000 yuan each on Ma Lei and Yao Jing. The total amount of the above fines reached 18.6 million yuan. In addition, due to the serious nature of the violations, Jin Guoqing and Jin Zhenghui may be subject to a five-year ban from the securities market.

In addition to false records, the Anhui Securities Regulatory Bureau’s “Administrative Regulatory Measures Decision” also exposed serious internal control deficiencies in Si Er Te. From 2016 to 2019, Si Er Te illegally used funds raised from non-public offerings.

Moreover, during the period when Si Er Te’s subsidiary Anhui Xin Hong Da Health Industry Management Co., Ltd. (hereinafter referred to as Xin Hong Da Health) managed Xuancheng Dongchen Health Industry Management Co., Ltd. (hereinafter referred to as Dongchen Health), the then chairman Jin Guoqing of Si Er Te concealed his shareholding in Dongchen Health, resulting in inaccurate related information disclosure. At the same time, Xin Hong Da Health provided loans to Dongchen Health under the guise of management, leading to non-operating occupation of listed company funds by the related party Dongchen Health amounting to 110 million yuan, of which 32 million yuan has not yet been repaid.

(Source: Daily Economic News)