Longtop (LFT) Shares Volatile as Research Report Claims Fraud

Longtop Financial Technologies Limited (NYSE: LFT) shares have been volatile today following a negative research report from Citron Research.

Citron makes the following assertions:

• Margins are out of whack - Longtop reports gross margins of 69 percent and non-GAAP margins of 49 percent. Its peers had gross margins of 15 - 50 percent and non-GAAP margins of 10 - 25 percent or lower.
  
  
• Longtop has 80 percent of its employess employed through a third-party, Xiamen Longtop Human Resources Services Co (XLHRS). Longtop claims that this is an unrelated party. Citron notes that XLHRS uses the same email, same building and has no other customers aside from Longtop.
  
  
• Management left out that they had worked for a company, which they then sued and lost, and then sent a fraudulent letter to Xiamen Postal Office stating that the company changed its mailing address. The new address was set up for the two managers to intercept incoming mail, and steal customers.
  
  
• Longtop Founder and Chairman Hiu Kung Ka has gifted about 70 percent of his stock holdings to employees withing the first four years of its operations. Ka gave away about 9 million shares, valued at nearly a quarter-billion dollars.
  
  
• Longtop is audited by Deloitte Touche Tohmatsu, which has come under recent scrutiny from its dealings with China MediaExpress (Nasdaq: CCME).

Shares of Longtop Financial last traded at $25.92, up 1.5 percent.

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