Phosphate fertilizer giant Cilt and others face fines exceeding 18 million yuan, and their stocks will be marked as "ST"! The former chairman set up a "small treasury," leading to a major case of false records.

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        Reporter: Zhao Linan | Editor: Chen Junjie              

On March 27, Sierte (Rights Protection) (SZ002538, share price 7.24 yuan, market cap 6.18 billion yuan) announced that the company and multiple related parties face a major set of penalties from the Anhui CSRC.

A reporter from The Daily Economic News noted that Sierte and the relevant defendants may face a total fine of up to 18.6 million yuan. The company’s former chairman, Jin Guoqing, and/or its former general manager, Jin Zhenghui, may each face a 5-year ban from the securities market.

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

As it turns out, the trigger for the above case was an internal “embezzlement of office” case at Sierte.

In late 2023, during an internal self-inspection, Sierte found that some management personnel were allegedly using their positions to embezzle large amounts of property belonging to its wholly owned subsidiary, Guizhou Lufa Industrial Co., Ltd. (hereinafter referred to as “Guizhou Lufa”). Faced with the company’s repeated interviews, the relevant personnel not only refused to cooperate with the self-inspection, but instead resigned one after another.

On January 17, 2024, Sierte officially filed a report with the Ningguo Municipal Public Security Bureau, and on January 18, 2024, it issued an announcement titled “Announcement on Filing a Report with Public Security Authorities.”

As the public security authorities began investigating, the hidden scandal within Sierte was gradually uncovered. On September 29, 2025, Sierte received a “Notice of Referral for Review and Prosecution” served by the Xuancheng Municipal Public Security Bureau. The case was formally transferred to the Xuancheng Municipal People’s Procuratorate for review and prosecution. According to information the company has learned, this referral for review and prosecution involves the company’s former directors, senior management, as well as some company employees and staff of related securities service intermediary institutions.

Sierte’s announcement shows that the main criminal facts allegedly involved include: allegedly using their positions to embezzle long-term large amounts of property belonging to the company and wholly owned subsidiary Guizhou Lufa; allegedly fabricating urea procurement transactions to transfer company funds out, then further fabricating organic fertilizer sales to channel some of the funds back and obtain government subsidies by deception; allegedly accepting fake VAT special invoices that were issued on the basis of nonexistent transactions during the fabricated urea procurement transactions; and allegedly accepting bribes by non-state functionaries in connection with the implementation of the above criminal conduct.

During the investigation and case handling process, Sierte once faced the risk of being held criminally responsible as an entity. However, in January 2026, Sierte received a “Decision of Not Prosecution” served by the Xuancheng Municipal Xuanzhou District People’s Procuratorate of Anhui Province.

After examination according to law, the procuratorial authority found that the then chairman of Sierte, Jin Guoqing, set up a “small vault” funded with diverted monies and arranged for others to sign fabricated urea procurement contracts with an Anhui agricultural inputs trading company and an Anhui agricultural inputs company to extract funds without any real goods transaction, and to have these companies issue VAT special invoices for excess to Sierte. At the same time, Jin Guoqing and others also fabricated sales records for organic fertilizer in order to obtain government subsidies by deception, and carried out similar conduct of fabricating contracts to extract funds between January 2020 and February 2022.

The procuratorate held that Sierte did not issue VAT special invoices for the purpose of defrauding the state of tax revenue, which does not constitute a crime, and decided not to prosecute Sierte.

Although Sierte was exempted from prosecution, the executives’ related conduct directly led to false statements in the company’s periodic reports, which drew great attention from the securities regulatory authorities.

In September 2025, Sierte was put on record for investigation by the China Securities Regulatory Commission for alleged violations in information disclosure. On March 27, 2026, the “shoe finally dropped.” The Anhui CSRC issued to the company and the related parties a “Notice of Advance Information on Administrative Penalties and Market Entry Bans” and a “Decision on Ordering Rectification Measures” regarding Anhui Sierte Fertilizer Co., Ltd., Anhui Ningguo City Agricultural Means of Production Co., Ltd., and Xuancheng Dongchen Healthy Industry Management Co., Ltd.

According to the findings, Sierte’s false records mainly fall into two parts. First, fabricating construction works business. In 2021, Sierte’s wholly owned subsidiary Guizhou Lufa and Kaoying Branch of Shaanxi a certain Jie Construction Group Co., Ltd. prepared false trolley boring contracts and settlement documents, fabricating trolley boring operations. In addition, Guizhou Lufa also signed construction contracts with three companies, including Zhejiang a certain Xiang Construction Engineering Group Co., Ltd., Wenzhou a certain Tai Construction Engineering Co., Ltd., and Fujian a certain Hui Construction Group Co., Ltd., but these three companies did not provide engineering services, constituting fabricated construction works business.

Second, fabricating urea procurement and organic fertilizer sales. Sierte fabricated urea procurement from Anhui a certain He Agricultural Inputs Co., Ltd. and Fengyang a certain Shun Agricultural Inputs Co., Ltd., inflating operating costs. Meanwhile, the wholly owned subsidiary fabricated sales of organic fertilizer to 17 distributors, inflating operating revenue.

Taken together, in 2021, Sierte’s total inflated profits were approximately 36.35 million yuan, accounting for 6.76% of the total profits disclosed for the period; in 2023, its total deflated profits were approximately 17.35 million yuan, accounting for 10.35% of the total profits disclosed for the period.

In response, the Anhui CSRC plans to issue penalties: order Sierte to make corrections, issue a warning, and impose a fine of 6 million yuan; for the then chairman Jin Guoqing and the then general manager, Jin Zhenghui (also the general commander of Guizhou Lufa), separately issue warnings and impose fines of 3 million yuan each; for Fang Jun, issue a warning and impose a fine of 2 million yuan; for Wen Jibing and Huang Xili, respectively issue warnings and impose fines of 1.5 million yuan each; for Ma Lei and Yao Jing, respectively issue warnings and impose fines of 800,000 yuan each. The cumulative penalty amount of the above fines totals up to 18.6 million yuan. In addition, because Jin Guoqing and Jin Zhenghui’s illegal circumstances are serious, they are proposed to be subject to a 5-year ban from the securities market.

In addition to the false records, the “Administrative Regulatory Measures Decision Letter” from the Anhui CSRC also exposed Sierte’s serious internal control deficiencies. Between 2016 and 2019, Sierte improperly used funds raised from non-public issuance.

Additionally, during the period when Sierte’s subsidiary, Anhui XinHongda Healthy Industry Management Co., Ltd. (hereinafter referred to as “XinHongda Healthy”), managed and administered Xuancheng Dongchen Healthy Industry Management Co., Ltd. (hereinafter referred to as “Dongchen Healthy”), the then chairman of Sierte, Jin Guoqing, concealed its shareholding in Dongchen Healthy, leading to inaccurate information disclosure. At the same time, XinHongda Healthy provided loans to Dongchen Healthy in the name of the management arrangement, causing Dongchen Healthy, a related party, to non-operationally occupy 110 million yuan of the listed company’s funds; currently, 32 million yuan still has not been repaid.

Cover image source: Liu Guomei

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