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Citron does not guarantee in any way that it is providing all of the=20 information that may be available. We recommend that you do your own due = diligence before buying or selling any security. At any times the = principals of=20 Citron might hold a position in any of the securities profiled on the = site.=20 Citron will not report when a position is initiated or covered. Each = investor=20 must make that decision based on his/her judgment of the market.=20

China Biotics (CHBT) is a Fraud =E2=80=93 Now sue Citron- = We Dare=20 You.

Posted in Citron Reports by CitronResearch on the = September 14th,=20 2010

stock ticker: = CHBT

Yesterday, DYP and DGW = were the=20 number 1 and 2 losers in the market declining 54% and 41%=20 respectively. This only shows the fragility and lack of=20 transparency that exists with small cap Chinese companies. Citron = will=20 prove that China Biotics does not just lack transparency, but rather it = is an=20 outright fraud

Citron Research has been writing about stock fraud for over 9 = years. In=20 that time, we uncovered numerous frauds that have subsequently been = delisted and=20 management charged by the SEC. Yes, we have made mistakes in the = past, as=20 have even the best researchers, but we have NEVER been wrong = about a=20 fraud.

With that, Citron is confident to state =E2=80=9CChina=20 Biotics is a fraud=E2=80=9D If we are lying, then please = sue us and we will=20 prove it in court. Or, put out a press release defending yourself = and=20 explicitly blame Citron Research, and we will sue you proactively to = prove that=20 you are committing securities fraud on the investing = public.

We do not use the fraud word lightly, but frauds have a certain way = of=20 playing out, and sure enough CHBT management is following along right = with the=20 script. You don=E2=80=99t have to be Sherlock Holmes or even = Encyclopedia Brown to=20 figure this one out.

The curious case of the missing stores and the ol=E2=80=99 = switcheroo=20 trick.
Two weeks ago in our first article, Citron questioned = the=20 =E2=80=9Cnetwork of stores=E2=80=9D that are claimed by CHBT = =E2=80=93 the same stores referenced=20 in years=E2=80=99 worth of SEC filings, but are also discussed in every = analyst=20 report. More importantly, the stores that investors relied upon = when they=20 forked over $75 million for shares . Citron does not = believe that=20 Roth Capital intentionally tried to defraud the public, rather = they=20 became collateral damage. In the second line under use = of=20 proceeds, the registration statement states =E2=80=9Cto expand our = retail=20 operations=E2=80=9D.

Once we questioned the stores existence, CHBT immediately put on = their=20 website a list of the =E2=80=9Cbranded stores=E2=80=9D as they state in = their SEC filings.

Within hours Citron was able to determine that these were not their = stores,=20 95% of them were just supermarkets and retail outlets. We took it = a step=20 further and hired two private investigators to take pictures and prove = what we=20 knew. Once we brought that to the attention of the investing = public, the=20 company changed their website again to eliminate the word=20 =E2=80=9Cstores=E2=80=9D=E2=80=A6a play right out of the = scamsters=E2=80=99 handbook. They also=20 eliminated the line =E2=80=9CThe = Company=E2=80=99s most recognizable=20 customers include Bright Dairy, and Relax Xinqiao.=E2=80=9D Why? = Now it just says=20 =E2=80=9Cthe following is a list of sample locations where you can find = our=20 product.=E2=80=9C

http://www.chn-biotics.com/c4426/c4435/default.html

Just to remove any doubt about =E2=80=9Cwhat they said=E2=80=9D and = =E2=80=9Cwhat they meant=E2=80=9D,=20 reference the company=E2=80=99s June 2010 investor presentation: http://www.chn-biotics.com/files/CHBT%20June%202010.pdf

Page 4, bottom: China-biotics operated 111 retail = outlets as=20 of March 31, 2010, each outlet has an average payback of less than one = year.=E2=80=9D

Where are the stores? Where is the money that goes to salaries = and=20 leases for these stores? Whose pockets is it in??? Did = we=20 mention this is a fraud??

The curious case of = the missing=20 money=E2=80=A6 check this out.

When you put money in the bank you get interest=E2=80=A6 DUH.

China Biotics claims its cash in the bank is $159.7 million in the = bank,=20 according to its June 30 SEC filing =E2=80=93 every dollar of which is = supposedly=20 available for corporate purposes. Yet it reports interest = of just=20 $87,876. So where is the=20 interest? . How can the company be = earning=20 interest of less than 1/10th of comparable companies? = Companies with=20 large cash balances earn interest. Interest rates on free cash = balances in=20 China earn 1% for 3 month to 1 year term deposits, and 2% for 1 to 2 = year term=20 deposits.

Simple math tells us that at 1% interest the cash should generate = $400,000=20 per quarter in interest income. At 2% this same cash balance = should=20 generate $800,000 per quarter.

So either the company is only getting 1/10th the interest rate = that it=20 should be getting in china, or 90% of the money is not IN THE=20 BANK. One would assume that the company is using some of the funds = for=20 working capital and to build out its new operations. However the SEC filing states that it is all in the=20 bank!

CHOP earned $278,000 (1.44%) interest on $77.3 million in the last=20 quarter.

XIN earned $554,000 (1.33%) interest on $166 million in the last = quarter

CAGC earned $171,000 (1.32%) interest on $51.7 million in the last=20 quarter.

Even Orient Paper earned $108K (1.55%) interest on its $7 = Million=20 cash in 2009=E2=80=A6

The curious case of = the=20 conflicting financials

A great debate is now ongoing about disclosure documents filed in = China and=20 those filed in the US. Citron has read the =E2=80=9Cplausible = deniability=E2=80=9D=20 explanations from Roth and others about how variations in rollups and = tax=20 treatment might make for a partial misalignment of the numbers in these=20 reports. Other claims, such as fear of disclosing corporate = secrets to=20 competitors, seem nonsensical and downright moronic as anyone has free = access to=20 SEC documents.

The numbers are not just off because of different GAAP standards or = maybe=20 some accounting practice, the difference between the two is as wide as = the Great=20 Wall. Just take a look.

2008 Filings=20 Disclosures	SAIC	SEC
Cash	100,000	64,300,000
Accounts Receivable	1,000,000	13,200,000
Revenues	500,000	42,300,000
Gross Profits	200,000	30,000,000
Net income	(1,200,000)	17,500,000

Now the =E2=80=9Clongs=E2=80=9D or in this case people who are about = to apologize to Citron=20 will argue that these are not audited and the company is lying to China = and=20 telling the truth to US regulators and the investing public.

LOLOL

CHBT=E2=80=99s SAIC filings are audited. Just = go to page 80 of=20 the filings and you will see the audit report of a top 100 Chinese = accounting=20 firm. http://chinesecompanyanalyst.files.wordpress.com/2010/08/= chbt-aic-filings-in-english-translated2.pdf

And as for lying to the Chinese Government but not the SEC, you want = us to=20 believe that management who lives and pays taxes in China, where white = collar=20 crime can be punishable by death, will lie to the Chinese Government but = they=20 will not lie to the SEC? And why are we supposed to believe this ? = C=E2=80=99mon =E2=80=A6 if only the stock market was always this = easy.
The fate of CSKI=20 is an interesting tell. That company too had massive discrepancies = between=20 SAIC and SEC disclosures. Now, the company finally confesses that = =E2=80=9Csome=20 distributors=E2=80=9D, under pressure from Chinese regulators, suddenly = don=E2=80=99t want to=20 play ball, a resigned CFO, an ugly restatement, a formal investigation = and=20 subpoena from the SEC, and a 50% haircut later, reality has extracted = its price=20 =E2=80=A6 on the suckers. Good luck suing =E2=80=98em now.

The = Company=E2=80=99s=20 Response

Well heck, they had to say something. On Friday September 10, = the=20 company released a statement commenting on their stock.

http://finance.yahoo.com/news/ChinaBiotics-Inc-Comments-o= n-prnews-1108787132.html?x=3D0&.v=3D62

In it they don=E2=80=99t defend their alleged stores claim = explicitly. Instead=20 they state that there are =E2=80=9Cmarket rumors=E2=80=9D. Where = are the rumors?? These=20 are facts. The generic press release blaming the shorts is = so old,=20 tired, and predictable. Cmon, you could have at least signed = a=20 distribution deal with Santa Claus to bring your products to all the = boys and=20 girls of the world.

Corporate=20 Credibility

One of the big corporate news story over the past few months was the = firing=20 of Mark Hurd from HP for fudging an insignificant amount on an expense=20 report. While this might have been a bit extreme, it shows Wall = Street=20 operates with zero tolerance for lying.

What amazes Citron is that the longs in this stock are proud of = management=E2=80=99s=20 ability to selectively lie. It is OK to lie about the = stores=E2=80=A6 because it=20 is now just a small part of their future revenue projections. = Well, it=20 wasn=E2=80=99t such a small part of the company=E2=80=99s revenues when = they used that very=20 track record from those =E2=80=9Cbranded stores=E2=80=9D to raise $75 = million from US=20 investors.

(we think the only fair thing for the company to do is offer the = secondary=20 buyers their money back immediately. )

Meanwhile, is it also OK to lie to the Chinese Government? We = are sure=20 there will be a great story as to where the money is now.

Citron believes that the whole business model is a lie from top to = bottom and=20 management has zero credibility to say anything different.

Don=E2=80=99t forget the old adage: At every poker game there = is a sucker, and=20 if you don=E2=80=99t know who the sucker is, it is you=E2=80=A6 You have = been warned.

Cautious Investing To All

EXTRA CREDIT = READING for the=20 CURIOUS:

For those of you who still believe in the =E2=80=9Cstores=E2=80=9D, I = guess we all need some=20 blind faith, here is some fun reading.

The Results, and the photos

43 of the locations published on the = company=E2=80=99s website,=20 until recently claimed to be =E2=80=9Cbranded outlet=E2=80=9D locations = have now been surveyed,=20 with photos:

Company stores (like those pictured on the = company=E2=80=99s=20 website)	2
Supermarkets or drugstores carrying one or two = products on=20 a small shelf space :	16
A store offering no CHBT product whatsoever on its=20 shelves	17
No retail at that address, or nothing at all	8
Store-within-store or kiosk (Yes our visitors = politely asked)	0 =

http://www.therealchbt.com/index.php?option=3Dcom_stores&= amp;view=3Dlist&Itemid=3D8

This is not a rumor.

China Biotics (NASDAQ:CHBT)

Posted in Citron Reports by CitronResearch on the August = 31st, 2010=20

stock ticker: = CHBT

=E2=80=9CWhere are the stores ?=E2=80=9D Update August 31, = 2010=E2=80=A6Either the Company=20 does not know how to communicate=E2=80=A6or it is a fraud. You = decide.

China Biotics (NASDAQ:CHBT) is out with a response to = Citron=E2=80=99s report of=20 yesterday, in which we questioned the accuracy and credibility of the = company=E2=80=99s=20 disclosures. The company is hosting an =E2=80=9CInvestor = Day=E2=80=9D in Shanghai =E2=80=9Cby=20 reservation only=E2=80=9D. Citron suggests that this event is = unlikely to produce=20 credible answers needed to tough questions about all the aspects of this = company=E2=80=99s disclosures that don=E2=80=99t line up with = reality.

More significantly, the company for the first time posted a list of = locations=20 when its corporate website returned to service today.
http://www.chn-biotics.com/c4426/c4435/default.htmlCitron=20 can=E2=80=99t help but conclude the newly posted list of locations is in = response to our=20 publicly posted challenge yesterday.

The problem is, here=E2=80=99s what the company says about its retail = locations:

From China Biotics 10-K

=E2=80=9CAs of March 31, 2010, = we had 111 Shining=20 branded outlets in Shanghai and 12 other major cities in China. We = have been=20 hiring consultants who have many years of experience in the direct = selling=20 industry to facilitate the development of new Shining brand=20 outlets.=E2=80=9D

The company states it is expensing $3.9 million US annually for its = tiny=20 office and production facilities, plus, presumably the retail locations = it=20 describes above:

=E2=80=9CRental expense, which = was charged to=20 expense, amounted to $3,906,098, $3,363,300, $990,300 for the years = ended=20 March 31, 2010, 2009 and 2008, = respectively.=E2=80=9D

Elsewhere it states it employs 232 retail outlet employees.

You would assume that this kind of expense and employee footprint is=20 commensurate with a 100-branch retail network, no? Something = matching the=20 classy photo of the yogurt shop they show here, right?

3D"Yogurt

Well, it appears the majority of the 100 locations they just=20 published are not in fact leased company stores, but are = locations of=20 supermarkets, mostly located around the greater Shanghai area. =20

For example, their first listed location , 62 Wensu Road, Jiading = District,=20 is this Jiadeli Supermarket, a chain of over 140 stores.
http://icexpat.com/nm_AddressDetails;mid_3711366A2FD34ABF= 824EA1F0A7FF6014.shtml

Further down the page is =E2=80=9CJiading District, 420 Yumin = Road=E2=80=9D This is=20 Jiadeli Supermarket #59.
http://www.icexpat.com/nm_AddressDetails;mid_62F4670E393C= 478E967D3751049F748F.shtml

At least 10 other locations listed on the company=E2=80=99s website = are found on this=20 single listing of Supermarkets in the greater Shanghai metro area:
http://webcache.googleusercontent.com/search?q=3Dcache:z6= eRGG1ewnwJ:chinauniquetour.com/html/Shanghai/2009423/arts-5808.html+88+Ba= ode&cd=3D5&hl=3Den&ct=3Dclnk&gl=3Dus

For example, = look at 1538=20 Caoan , 501 Sanmen Road, 1557 Yunchuan, 8991 Nanfeng, 1218 Wuzhong, 88 = Baode,=20 3155 Qixin Road. 1500 Xincun, 1688 Tongchuan, Lane 133=20 Linping, 8 Baoming etc., etc.

Research is = ongoing, but=20 it appears the company is being intentionally misleading in these = disclosures. Shelf space in a supermarket does not equate to a=20 freestanding retail location, period. They have had ample = opportunity to=20 respond to a simple question and this is their answer. This only = leads to=20 more troubling questions, such as: =E2=80=9CWhere is the money = really going? =20 Where are the 232 employees stationed? Why post huge capital = commitments=20 to the animal feed business, with obviously far lower margins = ? Why=20 scurry away from the retail business after making such a big deal about = its=20 retail network ?

Conclusion

There is no such thing as =E2=80=9Chalf a = lie=E2=80=9D when it=20 comes to public company disclosures. It simply leads to deeper = questions=20 about every aspect of the company=E2=80=99s integrity. Citron = reminds investors of=20 the regulatory gap that allows Chinese companies with US listings to = live in the=20 margins, held accountable by neither Chinese authorities nor the = SEC.

Sorry folks. This one is a recipe = for=20 indigestible investor losses. The company is now caught in a web = of its=20 own deception, and will be greatly challenged to square its disclosures = with=20 verifiable data points. On the financial side, its claims of a = stock=20 buyback plan and a huge cash hoard are inconsistent with its = capital-raising=20 activities. Its reported gross margins do not square with its = recent=20 production capacities, and its gross revenues are inexplicably high = related to=20 its peers in the industry. Its SEC and AIC financial reporting = profile two=20 entirely different realities.

Cautious Investing to = All

It Doesn=E2=80=99t Take a Microscope to See = What=E2=80=99s Wrong with China-Biotics=20 (NASDAQ:CHBT)

Posted in Citron Reports by CitronResearch on the August = 30th, 2010=20

stock ticker: = CHBT

It Doesn=E2=80=99t Take a Microscope to See What=E2=80=99s Wrong = with China-Biotics=20 (NASDAQ:CHBT)
Citron Probes the Obvious: Where are the = Stores?

Amazing how fraud is like water, it just finds the path of least=20 resistance. When Citron started this column nine years ago this = week, the=20 frauds were OTCBB stock promotions run out of boiler rooms. The = progressed=20 to internet campaigns and mailers, and now most recently to the greatest = promotion of =E2=80=98em all: CHINA. In this past = weekend=E2=80=99s Barron=E2=80=99s=20 Magazine, Bill Alpert does a fine job in describing the web of fraud = that exists=20 in small cap Chinese stocks that were brought to market via reverse = merger.

http://online.barrons.com/article/SB500014240529702043044= 04575449812943183940.html?mod=3DBOL_hpp_mag

In the article, Barron=E2=80=99s observes:

=E2=80=9CThe SEC=E2=80=99s enforcement staff can=E2=80=99t = subpoena evidence of any=20 fraudulent activities in China, and Chinese regulators have little = incentive=20 to monitor shares sold only in the U.S. Many reverse-merged companies = admit in=20 prospectuses that they haven=E2=80=99t gotten required approvals under = China=E2=80=99s=20 financial regulations.=E2=80=9D

Citron has written about a reversed merged China stock in 2007 = (Xinhua=20 Finance Media NASDAQ:XFML). When we published, it was $10.00 and = now it is=20 .18 cents (ticker now XSEL). After reading this = weekend=E2=80=99s Barron=E2=80=99s,=20 we thought we would share the interesting case of China-Biotics as it = seems so=20 timely and relevant.

While the world =E2=80=9Cbiotics=E2=80=9D might sound impressive, it = really is nothing more=20 than a food supplement that in this case comes in the form of an = acidophilus=20 pill. Worldwide, there are literally dozens of manufacturers of = the=20 bacteria concentrate in these supplements. It is a mature and = stable=20 low-margin industry.

We could probably write 10 pages on what stinks about this China = Biotics and=20 what raises the red flags for fraud.

It would be easy to look at the gross discrepancies between the = company=E2=80=99s=20 SAIC and SEC filings.=20
It would also be possible to show pictures of the half-finished=20 over-budget manufacturing facility side-by-side with company claims = that it=20 was already in production, or the photos of their current production=20 facilities the size of a =E2=80=9Cbathroom=E2=80=9D where the = acidophilus pills drop out of a=20 machine two by two.=20
Most compelling, it would be simple to question how a company who = sells=20 the bulk of their product though distributors, who then purportedly = resell=20 them to Wal Mart (so they claim) can generate EBIDTA margins of 40-45% = when=20 their competition is at 27% max. (Multinational companies in the = business include Danisco, Yakult, Perrigo, Cargill and = others.) =20 The company claims its high margins are due to its =E2=80=9Cretail = channel=E2=80=9D.=20
Or, as if one needs any more of a red flag, we could discuss how = the=20 company has been through 5 CFOs in only 4 years

CHBT CFO History	Start Date	End Date
Song Jinan	3/22/2006	11/13/2006
Li Chi Yuen (Raymond)	11/13/2006	03/06/2009
Lewis Fan	03/06/2009	10/21/2009
Yan Yihong (Eva)	10/21/2009	01/22/2010
Travis Cai	01/22/2010	Present

We could discuss the company=E2=80=99s $50 million plus financial = commitments due=20 in 2010 or its looming potential tax liability from questionable past=20 financial transactions that could also be as high as another $50 = million.=20

But all of those arguments would either require Citron to prove a = negative or=20 use arguments of inference. Or it would require shareholders to = actually=20 use some form of skepticism and analytics when judging the = numbers. So=20 instead we will ask an easy question that the company and shareholders = should=20 have no problem answering:

China-Biotics - Where are your stores?????

According the CHBT=E2=80=99s SEC filings,

=E2=80=9CAs of March 31, 2010, we had 111 Shining = branded outlets in=20 Shanghai and 12 other major cities in China where we sell our products = directly to the end users.=E2=80=9D

Below is a chart showing the company=E2=80=99s alleged retail store = growth since the=20 company completed its reverse takeover in March 2006.

3Dchbt4.gif=20

CHBT disclosed that =E2=80=9Cabout three quarters of these outlets = are located in=20 Shanghai and the rest are located in 12 other cities in China.=E2=80=9D = As a result, we=20 should expect that the company has at least 70 outlets in Shanghai.

Amazing that a company that is not at all shy in its use of = PR=E2=80=99s had this=20 explosive store growth without one: ribbon cutting, new store pr, or = notice of=20 opening.

Extensive web searches through http://map.baidu.com/ http://shanghai.aibang.com/=20 , and http://www.mapbar.com/=20 using the company=E2=80=99s disclosed brand names reveal only a handful = of stores. =20 We can find only 6 or 7 stores in Shanghai, and one each in Xeitu, = NanMatou,=20 Jingyu, Zhang YangLu, LingNan, FengZhuang.

In going through the corporate filings, it appears that the = company=E2=80=99s retail=20 outlets go under the brand = =E7=9B=8A=E7=94=9F=E6=9C=89=E7=9B=8A. That is = also the=20 name that we can see on the sign of the few stores that we actually = could=20 identify. Put that into http://map.baidu.com/ and see if = your=20 results differ.

Citron has heard from a handful of investors who all report that they = have=20 been unable to find any sign of even 25 locations, let alone over = 100.

The company claims there are more than 100 retail outlets, with at = least 70=20 of them in Shanghai. Proving that should be fairly easy: management = should=20 simply publicly disclose the addresses for every one of the = company=E2=80=99s retail=20 outlets.

Since a picture is worth a thousand words, here=E2=80=99s a look at = the store=20 China-Biotics identifies as its =E2=80=9Cflagship=E2=80=9D. = There=E2=80=99s very scant inventory,=20 but a lot of photos of what looks like a sales meeting for an MLM = organization,=20 a business model the company denies being a part of. Yet the = excuse=20 made by the proprietor of this store for the obvious lack of sales is = that =E2=80=9Cmost=20 of the sales are generated through a =E2=80=98buying club=E2=80=99 = =E2=80=9C.

NOTE: MLM sales organizations are strictly prohibited in=20 China. See what happened to Avon: http://www.chinaretailnews.com/2009/07/06/2798-avon-china= -investigated-for-multi-level-marketing/

OK, OK =E2=80=A6 those used to our stringent US disclosure standards = may be=20 asking=E2=80=A6=E2=80=9DWhat about the auditors..=E2=80=93 certainly = they have seen or have knowledge of=20 all of the stores, no ? =E2=80=9D

The auditors of CHBT are BDO Limited=E2=80=A6..who should not be = confused with BDO=20 Seidman, as all they really share with that big-name firm are 3 letters = in their=20 name as explained in this article by China Company Analyst.

http://seekingalpha.com/article/213213-orient-paper-not-a= ll-bdos-are-the-same

BDO seems to have become the auditor du jour for questionable Chinese = public=20 companies.

=E2=80=9CWell Citron, what about just going to the corporate website = and getting the=20 locations there?=E2=80=9D

You do it. If you try it on one of those days where the = corporate=20 website actually works ( http://www.chn-biotics.com/ ), you will not find a = list of=20 store addresses. How can any company claiming to be in the retail = business=20 (with over 100 stores) not even list store locations on their = site=E2=80=A6anyone,=20 anyone??

Conclusion

Investors need to be wary of the growing scrutiny that = Barron=E2=80=99s and other=20 investigative reports will bring upon these shenanigans. Citron = doesn=E2=80=99t=20 believe the current regulatory =E2=80=9Cenforcement-free zone=E2=80=9D = for US-listed China-based=20 companies is in the best economic interests of either the US or China, = and it is=20 not sustainable.

Within China, the country=E2=80=99s credibility in the international = marketplace is=20 regarded as a national strategic priority. It may seem that = China=E2=80=99s=20 culture has different standards when it concerns of questionable = business=20 ethics, but when the state becomes aware of a real economic threat, they = come=20 down hard. Just look at what happened to the CEO=E2=80=99s of = companies involved=20 in the melamine in milk scandal, the lead in toys scandals, etc. = Its no=20 wonder that the first sign a US investor may get of trouble in a Chinese = company=20 is when the CEO =E2=80=9Cdisappears=E2=80=9D.

There=E2=80=99s no need to get = embroiled in =E2=80=9Cshorts vs=20 longs=E2=80=9D battleground rhetoric here. It=E2=80=99s a very = simple matter: where=20 are the stores? If there are no stores, there=E2=80=99s no = margins, no profit and=20 nothing credible about this company or its management to hang an = investment=20 thesis on=E2=80=A6.period.

Alpert=E2=80=99s article shows how bad the odds are for investors in = these poorly=20 documented and regulated reverse-merger entities. But at the = bottom of the=20 class is a company whose entire operation is based on fiction.

Cautious investing to all.

Citron Updates Life Partners, Inc. (NASDAQ:LPHI)

Posted in Citron Reports by CitronResearch on the July = 28th, 2010=20

stock ticker: = LPHI

The SEC Has Spoken =E2=80=94 It=E2=80=99s Time for Investors to = Listen

The stock of Life Partners has been under pressure lately- and for = good=20 reason.

Over the years, Citron Research has presented several stories = alerting=20 readers to anticipated government regulation or intervention into a = =E2=80=9Ctoo good to=20 be true=E2=80=9D business model. Last year, we accurately warned of a = government=20 crackdown on the exaggerated marketing abuses of for-profit education at = Apollo=20 Group and Medicare reimbursement abuse at Amedisys. Both stocks are down = close=20 to 50% since our initial reports.

Yet, in Citron Research=E2=80=99s 9 years of publishing, we have = never seen a company=20 so clearly pinned in the crosshairs of a government launched = laser-guided smart=20 bomb =E2=80=93 at both state and federal levels.

For those of you who missed the first couple episodes here is a brief = bullet=20 point refresher:

The brokered spreads between prices paid and received for their = life=20 settlement policies is enormous, far beyond industry norms.=20
Disclosure is inadequate and transparency is poor to both parties = in its=20 brokered transactions.=20
It has for years operated under a Federal safe-harbor legal ruling = that=20 Life Settlements transactions are NOT securities sales.=20
It is restricted from operating in states that hold Life = Settlements=20 legally to be securities, and facing increasing scrutiny in others.=20
To settle a fraud suit brought by the State of Colorado, Life = Partners=20 bought back all the life settlements it sold in that state.=20
The company lost a legal challenge in Florida to its claim that = Life=20 Settlements are not securities.=20
Management has a tainted past: at the CEO=E2=80=99s last company = he was cited by=20 the SEC for overstating revenues and profits.=20
Currently the CEO maintains his stock in a trust domiciled in the=20 secretive tax haven nation of Gibraltar.

At that time, our opinion was that regulation of the life settlements = industry would destroy the business of Life Partners. In the opinion of = Citron,=20 that day has come.

In the SEC=E2=80=99s own words:

Last week the SEC released a 90-page report explicating the = securitization of=20 the Life Settlement markets, and headlining its strong recommendation = that=20 Congress bring Life Settlements under the umbrella of securities = regulation.=20 This report has many references to Life Partners and appears to be a = direct=20 assault on their operations.

http://www.sec.gov/news/studies/2010/lifesettlements-repo= rt.pdf

The report starts by stating how Life Partners has attempted to skirt = regulation, quoting from their 10-K:

=E2=80=9CSome states and the Securities and Exchange Commission = have attempted to=20 treat life settlements as securities under federal or state securities = laws.=20 We have structured our settlement transactions to reduce the risk that = they=20 would be treated as securities under state or Federal securities law, = and the=20 Federal Circuit Court for the District of Columbia has ruled that our=20 settlement transactions are not securities under the Federal = securities=20 laws.=E2=80=9D

An Outsourced, Unregistered Investment Sales Network that Recruits=20 Unqualified Investors

The SEC goes on to state the importance of protecting the investor = and uses=20 Life Partners as their poster child. As it states in the report,

=E2=80=9CAnother large participant acts as a purchasing agent of = life insurance=20 policies. This participant=E2=80=99s customers are primarily retail = investors 37 who=20 generally buy fractional interests in one or more=20 policies.₃₈=E2=80=9C

The SEC points this out explicitly, in contrast to much of = LPHI=E2=80=99s official=20 rhetoric, which states disingenuously that the company services = =E2=80=9Cinstitutional=20 investors=E2=80=9D.

LPHI=E2=80=99s filings with the SEC indicated that their business = model was based=20 upon sourcing capital from both retail investors and institutional = investors.=20 2009=E2=80=99s 10-K indicated that approximately 10% of its business = came from=20 institutional investors. This year=E2=80=99s 10-K, however, reveals that = the only institutional investor over the past 3 years = has been a=20 fund in which LPHI itself has made a $6.5 million = investment.=20 Thus, the company=E2=80=99s prior SEC filings failed to identify the = conflict of=20 interest and disclosure deficiency that existed during fiscal 2008 and = 2009.=20 Further, it failed to disclose that the related fund paid LPHI fees=20 approximating 2.0% of face value, compared to the 10.5% of face value it = charged=20 to its less sophisticated retail investors=E2=80=A6 but that is merely a = sideshow of the=20 larger issues.

The SEC=E2=80=99s report was recently covered by Business Week, which = reiterated the=20 need to do away with the informal sales networks that generate retail = investors=20 for the Life Settlement business.

http://www.businessweek.com/news/2010-07-22/life-settleme= nts-may-have-big-fees-lack-transparency.html

With a quick 10 minute Google search, Citron was able to find no less = than 5=20 Life Partners sales agents who are all making fraudulent statements that = misrepresent the risks/returns of investment in their life settlement = policies.=20 If we could do that in 10 minutes, how many will the SEC be able to = uncover with=20 subpoena power?

http://sagewealthsolutions.com/pdf/faq_ls.pdf

http://www.fayebagby.com/scripts/openExtra.asp?extra=3D7<= /A>

http://duquemin.net/

http://www.weddingphotographerdallas.com/verco/faq.html

http://www.warnekegroup.com/morelsinfo.html

The Disturbing Case of SEC vs Mutual Benefits

The most compelling part of the SEC report is on page 30, wherein = Life=20 Partners is compared to Mutual Benefits. Mutual Benefits was to date the = largest=20 Life Settlement scam; 30,000 investors lost $1 billion, before the SEC = brought=20 charges. http://www.sec.gov/litigation/complaints/comp18698.pdf

Note that Citron is not claiming that LPHI pulled = money out=20 of escrow to pay for investor withdrawals =E2=80=94 the classic Ponzi = Scheme =20 gambit. Neverless, some of the comparisons are = haunting. As=20 stated in the SEC report:

=E2=80=9CThe SEC brought an emergency action against Mutual = Benefits, charging that=20 it promised investors fixed returns ranging from 12% to 72%, while = falsely=20 representing life expectancy figures as having been verified by an = independent=20 physician. In reality, more than 90% of Mutual Benefits=E2=80=99 = policies had=20 surpassed their life expectancies. In order to deal with shortfall = resulting=20 from these maturing policies, Mutual Benefits effectuated a premium = payment=20 scheme, similar to a traditional Ponzi scheme, paying premium = obligations of=20 specific investors with monies escrowed for future obligations of = other=20 investors. The SEC also charged that at least $26 million in funds = collected=20 by Mutual Benefits was misappropriated by company insiders and their=20 relatives.=E2=80=9D

OK, lets break that paragraph down from the SEC that refers to Mutual = Benefits and lets see how it describes Life Partners.

=E2=80=9Ccharging that it promised investors fixed returns ranging = from 12% to=20 72%=E2=80=9D

Life Partners licensees also make outrageous claims. The Colorado = lawsuit=20 noted that LPHI=E2=80=99s largely unregistered licensees (its = representatives that=20 solicit funds from retail investors) promised, via radio = advertisements,=20 =E2=80=9Ca 14 year average annual return of more than 16% with low risk = to principal=E2=80=A6=20 while falsely representing life expectancy figures as having been = verified by an=20 independent physician.=E2=80=9D

Just like Mutual Benefits, Life Partners also does not = use=20 an independent party to prepare life expectancies. The in-house LE is = not common=20 practice in the industry and nowhere have we seen this=20 disclosed in any of LPHI marketing material.

=E2=80=9CIn reality, more than 90% of Mutual Benefits=E2=80=99 = policies had surpassed their=20 life expectancies=E2=80=9D

Statistics on LPHI=E2=80=99s policies indicate that 76% of insureds = are living longer=20 than the company=E2=80=99s recorded Life Expectancy.

=E2=80=9CIn order to deal with shortfall resulting from these = maturing policies,=20 Mutual Benefits effectuated a premium payment scheme =E2=80=A6 paying = premium=20 obligations of specific investors with monies escrowed for future = obligations=20 of other investors=E2=80=9D

According to the LPHI 10-K: =E2=80=9CWe make advances on policy = premiums to maintain=20 certain policies.=E2=80=9D They have also gotten into the business of = buying some of the=20 policies. Imagine if Countrywide had funded defaulted mortgages out of = profits=20 just to make its disclosed default rates look healthier.

This chart shows that that LPHI has originated over 75% of all its = life=20 settlements in the past four years. Most of the current premium advances = appear=20 to be servicing policies that were sold to investors prior to = 1998.

The Story in the Numbers:

Last year Life Partners reached an agreement with the State of = Colorado to=20 settle fraud charges. As part of the settlement, they agreed to buy back = all of=20 the policies written to Colorado investors. These policies can now be = analyzed=20 for performance, revealing a dirty little secret about Life = Partners=E2=80=99 track=20 record.

http://www.dora.state.co.us/dora_pages/newsreleases/LifeP= artnersSummaryJudgement.pdf

For those of you who are number junkies, here is a brief analysis of = what we=20 now know of Life Partners current financial health and trends that we = finally=20 can analyze in the =E2=80=9Cpost Colorado=E2=80=9D settlement. The = numbers are staggering and=20 speak for themselves. We welcome you to do your own homework.

Analysis of LHIP Fee Structure from Financial Filings=20 Data

	Fiscal 2007	Fiscal 2008	Fiscal 2009	Fiscal 2010	Q1 2011
Number of Settlements	220	200	196	201	38
Face Value of Policies	151,397,000	415,293,000	693,715,000	590,189,000	99,544,266
Average Revenue Per Settlement	135,433	363,046	528,645	562,171	703,060
Net Revenues Derived	12,231,000	36,822,734	54,420,577	62,019,160	15,047,257

Per Settlement Statistics (Calculated from Above) =

Conclusion

Life Partners=E2=80=99 business model only worked in an unregulated = world, where they=20 could freely match unsophisticated buyers with policy sellers purposely = left in=20 the dark about price transparency. This is precisely why markets are = regulated =E2=80=93=20 efficient markets need a level playing field and a fair referee to = prevent=20 brokers from gouging the transacting parties. Its main tools are to = enforce=20 transparency of price discovery and competitive fees.

Now, in the sunsetting phase of its business model, as the number of=20 unregulated transaction candidates dries up, its financial statements = reveal=20 that LPHI is being forced to close fewer transactions, of larger face = value, and=20 carve out for itself an ever larger share of the transaction fees. These = fees=20 are now nearly equivalent to the value paid to the seller of the = policies =E2=80=93 an=20 absurdly high value.

Meanwhile, it must =E2=80=9Cpay the piper=E2=80=9D =E2=80=94 out of = current profits =E2=80=94 for its=20 mounting legacy of overly-optimistic life expectancy estimates on its = portfolio=20 holdings policies.

We credit Life Partners for being an early mover in the Life = Settlement=20 business. For years they have been able to take advantage of a = non-regulated=20 market and set the rules for their own advantage.

However, that advantage, cashiered at the expense of their customers, = has not=20 created a sustainable business model or a fungible asset base in a = regulated=20 market. Once regulation forces full disclosure for investors, = unsophisticated=20 retail investors are excluded and sellers get a fair market, and margins = will=20 collapse as investment banking firms enter the market. Citron believes = LPHI=E2=80=99s=20 cash flow is doomed.

All good things must come to an end. It is now apparent more than = ever that=20 the epitaph will be written with SEC letterhead.

HUSA recent run-up is a =E2=80=9CSnow = Job=E2=80=9D

Posted in Citron Reports by CitronResearch on the April = 8th, 2010=20

	Fiscal 2007	Fiscal 2008	Fiscal 2009	Fiscal 2010	Q1 2011
Average Face Value Per Settlement	688,168	2,076,465	3,539,362	2,936,264	2,619,586
Total Fees	135,433	363,046	528,645	562,171	703,060
Percentage of Total Face = Value	*19.7%*	*17.5%*	*14.9%*	*19.1%*	*26.8%*
Fee Split Breakout
LPHI Fees	55,595	184,114	277,656	308,553	395,980
Percentage of Total Face Value (LPHI)	*8.1%*	*8.9%*	*7.8%*	*10.5%*	*15.1%*
Others (Selling Broker, LPHI Licensees)	79,838	178,932	250,989	253,618	307,080
Percentage of Total Face Value (Others)	*11.6%*	*8.6%*	*7.1%*	*8.6%*	*11.7%*

stock ticker: = HUSA

Citron alerts readers = about the=20 identity of the pseudo-analyst responsible for the puff piece = responsible=20 for jacking HUSA, a mere shell of an oil company, from 8 to 20 a share = over the=20 last month or so.

He is none other than David G Snow, a name you might not know if = you=E2=80=99re a=20 newbie to the stock fraud beat. But for you old-timers, grab your=20 Fedoras.

David G. Snow is none other than the notorious analyst who pegged = the $1000=20 price target on Solv-Ex, one of the most notorious stock frauds of the = 90=E2=80=99s =E2=80=A6=20 and probably the largest energy stock fraud ever =E2=80=A6 until Enron = came along.

(more=E2=80=A6)=20

American Superconductor (Nasdaq:AMSC)- One Product + One = Customer +=20 One Country =3D Many Problems

Posted in Citron Reports by CitronResearch on the March = 16th, 2010=20

stock ticker: = AMSC

During the past week, = many=20 companies associated with the wind industry in China have shown = weakness. =20 Citron would like to single out one company which we believe has a lot = more=20 downside potential=E2=80=A6.and it seems as if the CEO agrees with = us.

Background

American Superconductor is a classic old-school =E2=80=9Cstory = stock=E2=80=9D =E2=80=A6 a company=20 with an electric distribution grid innovation =E2=80=93 a = superconducting wire, that=20 when supercooled, carries 100 times more electricity. The company = has=20 touted this invention for more than a decade as = =E2=80=9Cthe next big=20 thing=E2=80=9D=E2=80=A6but other than a single demonstration project, it = has never been=20 monetized. (more=E2=80=A6)=20

SinoCoking (NASDAQ:SCOK) Follow the Money!

Posted in Citron Reports by CitronResearch on the March = 11th, 2010=20

stock ticker: = SCOK

It=20 is no surprise that Citron Research is not a big fan of Rodman & = Renshaw. A=20 few years back Citron had an epic battle with Rodman when they = placed a=20 stong buy recommendation on a company called Home Solutions of America=20 (NASDAQ:HSOA) that Citron called a complete fraud.

Flash forward a few years later and Home Solutions is now delisted = =E2=80=93 =20 yes, trading at 0.0006, Its officers were indicted for accounting = fraud,=20 exactly as Citron reported. .

http://www.sec.gov/litigation/litreleases/2009/lr21314.ht= m

Here You Go

Now they=E2=80=99re back with a new girl =E2=80=94 an ugly duckling = Chinese coal deal with an=20 utterly improbably rise and ridiculously unsustainable run-up on the = premise=20 that $6 PIPE investors (plus warrants at $12) with a six-month lockup = have a=20 bought =E2=80=9Cgreat deal=E2=80=9D. It=E2=80=99s like a horse = race with a donkey where the donkey=20 is started with a one-lap lead. (more=E2=80=A6)=20

Seabridge Gold (AMEX:SA)=E2=80=A6 Did you know = this?

Posted in Citron Reports by CitronResearch on the March = 10th, 2010=20

stock ticker: = SA

=E2=80=9CLook around the table. If you = don=E2=80=99t see a sucker,=20 get up, because you=E2=80=99re the sucker=E2=80=9D =E2=80=93 Amarillo = Slim

Dreams of Gold vs Reality of Share Prices

Seabridge=E2=80=99s explicitly advertised and promoted investment = premise is that it=20 is a =E2=80=9Ccall option=E2=80=9D on the future price of gold. = Citron believes this=20 premise is utterly false.
Aside from all the background noise about = stock=20 promotions, Seabridge investors invest in the stock because they hope it = will=20 rise in value as the price of gold rises. As the company has told = them, it=20 is a levered play on gold.

But the price of Seabridge stock is not tied to the price of gold, it = is tied=20 only to the supply and demand for Seabridge shares. That places=20 shareholder returns squarely dependent not upon the price of gold, but = upon the=20 actions of management and insiders. This is precisely why the past = activities of Seabridge=E2=80=99s insiders are so troubling. = However, the proof is=20 in the pricing. (more=E2=80=A6)=20

Seabridge Gold (Amex:SA) =E2=80=93Why the Majors are = saying =E2=80=98No=E2=80=99 while Wall=20 St. is saying =E2=80=98Yes=E2=80=99.

Posted in Citron Reports by CitronResearch on the March = 1st, 2010=20

stock ticker: = SA

There are now hundreds = of junior=20 gold mining companies throughout the world, doing extensive drilling. It = is=20 really getting challenging to look at every project. Best = practices for=20 investors are to stick to companies that have partnerships, earn-ins and = drilling agreements with major mining companies.

However, there aren=E2=80=99t many with zero gold reserves and a = billion dollar=20 market cap.

And then there=E2=80=99s Seabridge Gold. (AMEX:SA) (more=E2=80=A6)=20

Citron Research Reports on Garmin (NASDAQ:GRMN)

Posted in Citron Reports by CitronResearch on the = December 11th,=20 2009

stock ticker: = GRMN

Can Garmin navigate their way out of the dead end they=E2=80=99ve = driven into ?

Today marks the day that Nokia is shipping their first navigation = based phone=20 in to the US
http://hothardware.com/News/Nokias-5800-Navigation-Editio= n-And-E72-Smartphones-Ship-To-America/

Some have already called this new unit the = =E2=80=9CPND-Killer=E2=80=9D
http://www.twice.com/article/439546-Nokia_PND_Phone_Offer= s_Free_Services.php
This=20 announcement prompts us to look deeper into the future of navigation = leader=20 Garmin. While we=E2=80=99re reluctant to join a pinata party here, = the company=E2=80=99s=20 own comments at Wednesday=E2=80=99s Barclay=E2=80=99s investors=E2=80=99 = conference as delivered by its=20 CFO are particularly important for any investor, long or short, looking = to=20 establish an opinion on where management is =E2=80=9Cdriving=E2=80=9D. = (more=E2=80=A6)=20

=E2=80=94 Next Page = =C2=BB

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Disclaimer:

China Biotics (CHBT) is a Fraud =E2=80=93 Now sue Citron- = We Dare=20 You.

The curious case of = the missing=20 money=E2=80=A6 check this out.

When you put money in the bank you get interest=E2=80=A6 DUH.

The curious case of = the=20 conflicting financials

The = Company=E2=80=99s=20 Response

Cautious Investing To All

EXTRA CREDIT = READING for the=20 CURIOUS:

The Results, and the photos

China Biotics (NASDAQ:CHBT)

=E2=80=9CWhere are the stores ?=E2=80=9D Update August 31, = 2010=E2=80=A6Either the Company=20 does not know how to communicate=E2=80=A6or it is a fraud. You = decide.

Conclusion

Cautious Investing to = All

It Doesn=E2=80=99t Take a Microscope to See = What=E2=80=99s Wrong with China-Biotics=20 (NASDAQ:CHBT)

It Doesn=E2=80=99t Take a Microscope to See What=E2=80=99s Wrong = with China-Biotics=20 (NASDAQ:CHBT)Citron Probes the Obvious: Where are the = Stores?

China-Biotics - Where are your stores?????

Conclusion

Citron Updates Life Partners, Inc. (NASDAQ:LPHI)

The SEC Has Spoken =E2=80=94 It=E2=80=99s Time for Investors to = Listen

In the SEC=E2=80=99s own words:

An Outsourced, Unregistered Investment Sales Network that Recruits=20 Unqualified Investors

The Disturbing Case of SEC vs Mutual Benefits

The Story in the Numbers:

LPHI Fees

Percentage of Total Face Value (LPHI)

Others (Selling Broker, LPHI Licensees)

Percentage of Total Face Value (Others)

Conclusion

HUSA recent run-up is a =E2=80=9CSnow = Job=E2=80=9D

David G. Snow is none other than the notorious analyst who pegged = the $1000=20 price target on Solv-Ex, one of the most notorious stock frauds of the = 90=E2=80=99s =E2=80=A6=20 and probably the largest energy stock fraud ever =E2=80=A6 until Enron = came along.

American Superconductor (Nasdaq:AMSC)- One Product + One = Customer +=20 One Country =3D Many Problems

Background

SinoCoking (NASDAQ:SCOK) Follow the Money!

Here You Go

Seabridge Gold (AMEX:SA)=E2=80=A6 Did you know = this?

=E2=80=9CLook around the table. If you = don=E2=80=99t see a sucker,=20 get up, because you=E2=80=99re the sucker=E2=80=9D =E2=80=93 Amarillo = Slim

Dreams of Gold vs Reality of Share Prices

Seabridge Gold (Amex:SA) =E2=80=93Why the Majors are = saying =E2=80=98No=E2=80=99 while Wall=20 St. is saying =E2=80=98Yes=E2=80=99.

Citron Research Reports on Garmin (NASDAQ:GRMN)

Can Garmin navigate their way out of the dead end they=E2=80=99ve = driven into ?

Content on this page = requires a=20 newer version of Adobe Flash Player.

It Doesn=E2=80=99t Take a Microscope to See What=E2=80=99s Wrong = with China-Biotics=20 (NASDAQ:CHBT)
Citron Probes the Obvious: Where are the = Stores?