Core Viewpoint - The case of Guangdong Zijing Information Storage Technology Co., Ltd. highlights significant corporate fraud leading to severe legal consequences for its management, marking a notable decline from being a celebrated company to facing criminal charges and forced delisting [1][4]. Group 1: Company Background - Founded in 2010, Zijing Storage was a representative of domestic optical storage technology, initially focusing on Blu-ray media and expanding into storage devices and solutions for key sectors such as government, finance, and healthcare [5]. - The company successfully went public on the STAR Market in February 2020, achieving a market value exceeding 10 billion RMB, earning the title of "the first stock in optical storage" [5]. Group 2: Fraudulent Activities - From 2017, the actual controllers, Zheng Mu and Luo Tiewei, orchestrated fraudulent activities to inflate revenue and profits through fake sales contracts and falsified logistics documents, which misled investors and regulatory bodies [8]. - The scale of the fraud was alarming, with inflated profits exceeding 100% in certain years; for instance, in 2019, the inflated profit accounted for 137.31% of the actual profit, indicating severe financial distress when adjusted for fraud [6][9]. Group 3: Legal Consequences - The company was found guilty of securities fraud and fined 37 million RMB, with all ten core executives receiving prison sentences, the longest being seven years and six months [10][11]. - The court's decision reflects a stringent approach to corporate fraud, with the case being one of the first to apply the revised criminal law that increased penalties for fraudulent issuance of securities [14].

Core Viewpoint - The case of Guangdong Zijing Information Storage Technology Co., Ltd. highlights severe corporate fraud leading to the conviction of its top executives and the company's forced delisting from the Sci-Tech Innovation Board, marking a significant event in China's capital market [2][5][6]. Group 1: Company Background - Founded in 2010, Zijing Storage was once a representative of domestic optical storage technology, initially focusing on Blu-ray media and expanding into optical storage devices and solutions for key sectors such as government, finance, and healthcare [6]. - The company successfully went public in February 2020, achieving a market value exceeding 10 billion RMB, earning the title of "the first optical storage stock" [6]. Group 2: Fraudulent Activities - From 2017 onwards, the company's executives engaged in fraudulent activities to inflate revenue and profits through fake sales contracts, forged logistics documents, and early revenue recognition [10]. - The scale of the fraud was alarming, with inflated profits exceeding 100% in certain years. For instance, in 2019, the inflated profit accounted for 137.31% of the actual profit, indicating severe financial misrepresentation [10][11]. Group 3: Legal Consequences - The court found Zijing Storage guilty of securities fraud, imposing a fine of 37 million RMB. Key executives received prison sentences, with the highest being seven years and six months for the actual controller Zheng Mu [13][16]. - The case is notable as it is one of the first to apply the revised criminal law, which increased the maximum penalty for securities fraud from five to ten years, reflecting a stringent approach to corporate misconduct in China [16].

Core Viewpoint - The case of "Zijingshu Storage" (688086.SH) marks a significant turning point in China's capital market regulation, highlighting a new phase of strict enforcement against financial fraud, as the company becomes the first to be forcibly delisted from the Sci-Tech Innovation Board due to major violations [1][8]. Company Overview - Zijingshu Storage, established in 2010, was once a representative of domestic optical storage technology, initially focusing on Blu-ray media and later expanding into optical storage equipment and solutions for key sectors such as government, finance, and healthcare [2][9]. - The company successfully went public in February 2020, reaching a market value exceeding 10 billion yuan, and was regarded as a benchmark in hard technology [2][9]. Financial Misconduct - From 2017 onwards, the company systematically fabricated business operations and inflated profits to meet IPO agreements and maintain stock prices, resulting in a total of 754 million yuan in inflated revenue and 375 million yuan in inflated profits over four years, ultimately leading to a massive loss of 1.097 billion yuan [2][10]. - The company misled investors by concealing 135 million yuan in external guarantees in its prospectus and failing to disclose additional guarantees amounting to over 700 million yuan, which peaked at 22.46% of its net assets [4][12]. Legal Consequences - In November 2024, the public prosecution was initiated against Zijingshu Storage and ten individuals, culminating in a shocking verdict in November 2025, where all ten executives received prison sentences, with no one receiving probation [5][13]. - The actual controller, Zheng Mu, was sentenced to 7 years and 6 months in prison, while other executives received sentences ranging from 2 to 6 years and fines totaling 1.2 million yuan [5][13][14]. Accountability of Intermediaries - The collapse of Zijingshu Storage also implicated its underwriter, CITIC Securities, which was held responsible for 1.1 billion yuan in advance compensation, setting a historical record in A-share history [6][15]. - The new regulatory framework emphasizes that the responsibility for truthful information disclosure extends beyond companies to include brokers, accountants, and lawyers, who may face penalties ranging from 1 million to 10 million yuan if found complicit in fraudulent activities [6][15]. Regulatory Implications - The Zijingshu Storage case is part of a broader trend where several companies have faced severe penalties for financial fraud, indicating a clear regulatory path that emphasizes strict oversight under the registration system [6][17]. - The case illustrates that the era of leniency is over, and that information disclosure is critical, with fraudsters facing significant legal and financial repercussions [6][17].