The China Hustle Page #9

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What attracted me

to U.S.-listed Chinese stocks,

were the high returns.

There was a lot of hype

about them and

a lot of attention.

I was hoping to have

a nice retirement egg

for my wife and myself.

I do not have

a retirement plan at my job.

My wife doesn't have

a retirement plan at her job.

Roth Capital, issued

a buy recommendation.

The first company that really

kind of caught my eye,

was AgFeed.

Allegedly they were

the largest

feed producer in China.

My last shares,

that I purchased,

were $9 a share.

We recouped...12 cents

on the share.

And, we had a total

of about 26,000 shares.

What kind of loss did

that represent for you, personally?

It represented,

about a $150,000.

I think I lost well,

well in excess of a $100,000.

My investment in these

U.S. listed Chinese companies,

represented at least 50 percent

of my assets.

The prices tanked,

and they were eventually, um,

delisted and not tradable.

- Worth zero.

- Worth $0 per share.

We put our faith in the market,

in our government

to police that market.

And I think, uh, we got burned

on literally every turn,

in that particular transaction.

Roth Capital issued

a buy recommendation.

I'm not sure that they visited

the plant at all in China.

In fact, today,

I'm not sure that there was

a China Electric Motor company.

- How old are you, Ray?

- I'm 68 years old.

So where

did the money go?

To the bankers and lawyers,

who helped set up the deals.

And to the Chinese executives

who made millions

while their

companies collapsed.

I don't know what's worse,

that the executives were beyond

the reach of the law,

or that the enablers

on Wall Street were operating

inside the law,

just doing their jobs.

One way or another, almost all

of them got away with it,

scot-free.

One exception,

was Rodman & Renshaw.

Do you have just a moment,

General?

No.

During the heyday

of the reverse-merger boom,

they doled out

almost $18 million

in bonuses to their executives.

But their problems

caught up with them.

In 2012,

they paid a $315,000 fine

and surrendered

their brokers license.

Soon after,

they filed for bankruptcy.

So I want

to make sure you understand.

My investment bank

is called Enverra.

- Right.

- It's not Rodman & Renshaw.

- Right.

- I was the chairman

of Rodman & Renshaw,

I was not a banker

at Rodman & Renshaw.

I didn't have anything to do

with the financial transactions

in China.

That wasn't me.

I'm the guy that told them,

"You got a problem with it."

And I left the company, uh,

a year or so,

18 months after that,

from the board.

My question is,

who did he tell?

How about, "And then

I went down to Washington

and saw all the people

that I know while I was running

for president...

and told them

what was going on"?

I don't think I want

to be in the film.

I think it's just...

it, it invites attacks on me.

And I don't need that.

I'm trying to build a business.

I don't want to be attacked.

I didn't do anything wrong.

You're chairman of the board.

What role was it?

A non-executive chairman

of the board?

Was he the person

who ran the business,

or was he really there

as a figurehead,

to lend his name

to the credibility

of this situation?

I mean, that's the classic.

It's like Monica Lewinsky.

Forget about Monica Lewinsky.

It doesn't matter

what you say about it.

It's a bad story.

So let's, let's

just cancel this session, okay?

- I'm sorry I wasted your time.

- Do I,

do I send

shame on people?

Do I say, "Shame on you

for not asking

the right questions?

Shame on the auditors

for allowing this sh*t

to go through?

Shame on the regulators

for not making

the, the requirements

more stringent and difficult"?

So, you don't think

we have a problem here?

You want to blame this

on any one or two people?

Ridiculous.

It's ridiculous.

The whole thing is b... is broken.

It's broken.

Let's get out of this.

This is a mistake for me.

It's a mistake for the people

that depend on me.

I've got a firm.

I've got people

that work for me.

I owe them my best opportunity

to give them a living.

And, this doesn't help.

This hurts.

So I want out of this.

Well, I'm not...

This is not an attack piece

on you, sir.

It doesn't help...

That's not, that's not

my intention, nor is that...

Uh, I thought I could do this

in an academic way,

but I realize I can't.

You know?

I...

China is fundamentally

a broken

or f***ed-up societal system.

The people who get to the top,

get to the top

by breaking rules.

Good people who want

to play by the rules,

get stepped on and pushed

to the bottom of the pile.

This, in some ways,

has nothing to do with China.

If you gave American

management teams

that incentive structure,

oh, my God, we'd have

the same amount of fraud here.

It was just a no-brainer

for them.

Bulls versus bears, constantly.

And now that I'm deemed a bear,

I don't know if I'm ever gonna be

able to go back to the bull side.

But, no regrets working

for them.

My clients made money.

People get lost.

I think it happen

anywhere in the world.

But just that, in China,

everything has

a big multiple effect.

You know.

You have 1.3 billion people.

I mean,

the multiple effect is so big.

We've never seen a credit buildup

to the likes of what

China is doing today,

that hasn't been followed by a,

a major, major financial crisis.

So, stay tuned.

We, we have, by far,

the most vibrant markets

in the world. By far!

And so, that freedom,

leaving those decisions

to the private sector, you know,

it, it frees up a lot,

a lot of capital.

This is the largest financial crime

of the last 25 years, with

the exception of Bernie Madoff.

It's still way too easy

for the bad guys in finance

to keep Washington off their backs.

We're cutting regulations.

I would say 70 percent

of the regulations can go.

I think you see a lot of the

similarities with the mortgage crisis

in, in '08 and the China situation.

We had our chances,

post-global financial crisis,

in my opinion, and we missed it.

This was sort of the appetizer,

in, in that these were

the small, crappy companies

that, often times,

were demonstrable frauds.

We point to $50 billion,

and that's like an empirical number.

That's a number we can say, "Boom."

We can point to this and this fraud

and tie it in nicely on a bow.

What we don't talk about

is that there's hundreds

of billions of dollars

that we can't even begin to touch.

And the fraud that can be perpetrated...

through China by other means.

So it's not $50 billion,

and it's not some investment banks,

and it's not some people

in the United States.

It's everybody. It's every bank.

Whether they know it or not.

The Chinese e-commerce giant, Alibaba,

took Wall Street by storm today.

The company

had its initial public offering

on the New York Stock Exchange.

The share price jumped 38 percent...

This is a perfect storm.

This is a perfect storm.

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