---
title: "How a US$15 million Chinese pork deal turned into a cautionary tale for foreign investors"
description: "A group of foreign investors who invested nearly US$15.4 million in the Chinese pork processor Chuming Group in 2007 faced a lengthy legal battle after discovering fraudulent activities by the company"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/276523912.md"
published_at: "2026-02-22T02:16:01.000Z"
---

# How a US$15 million Chinese pork deal turned into a cautionary tale for foreign investors

> A group of foreign investors who invested nearly US$15.4 million in the Chinese pork processor Chuming Group in 2007 faced a lengthy legal battle after discovering fraudulent activities by the company's founder, Shi Huashan. Initially optimistic about their investment, the investors encountered obstacles in asserting their rights and were eventually locked out of the company. Despite a successful reverse merger with Energroup Holdings, the investors found themselves misled and betrayed, leading to a court victory in 2015 that revealed further misconduct. The case highlights the risks foreign investors face in China.

WHEN a group of foreign investors put millions of dollars into a once-leading Chinese pork processor in 2007, they probably did not expect that the investment would lead them into a years-long legal battle.

The investors said they were effectively locked out of the company and only later discovered what they called a fraudulent bankruptcy restructuring and a series of murky transactions orchestrated by the company’s founder.

When they tried to assert their shareholder rights in China, they encountered obstacles not only from the company but also from local authorities.

Their ordeal stands as a cautionary tale about the perils that foreign investors can encounter when investing in Chinese companies, as well as the difficulties they can face getting help from local authorities.

## A promising start

Founded in the late 1990s by Shi Huashan in Dalian, Liaoning province, Chuming Group ran into cash-flow problems around 2007, partly due to the debt it took on to acquire land for business expansion.

Shi was an influential figure in Dalian’s food industry. He held senior roles at several trade bodies, and even did a stint in politics as a member of Dalian’s top political advisory body.

With the help of the local government, a consortium of foreign investors invested nearly US$15.4 million in Shi’s company in 2007 through a company registered in the British Virgin Islands. Among the investors were US and Canadian companies, including Hunter Wise Financial Group and Redwood Capital, according to a shareholder list seen by Caixin.

Despite Chuming’s financial issues, the investors believed it was worth backing.

“At the time, Chuming held more than 50 per cent of the market share in Dalian, and had a good reputation across the entire north-eastern China market,” said Jin Zhengxin, the son of a shareholder in one of the investors who would later become deeply involved in their court battle.

A convoluted series of corporate manoeuvres followed, in which three key Chuming subsidiaries – for meat processing, food and sales – ended up in a company called Dalian Precious Sheen Investments Consulting (PSIC), whose parent company counted both Shi and the foreign investors as shareholders.

“The foreign shareholders were willing to invest purely as financial investors, without interfering in operations, let alone trying to compete for control of the company,” Jin said.

The goal was to go public in the US. That took place later in 2007, when PSIC’s parent completed a reverse merger with Energroup Holdings, an American company traded on an over-the-counter exchange.

Shi was appointed chairman of Energroup, leading a seven-member board that included four of his associates. The foreign investors had a lot of faith in Shi because he had operated Chuming for years and was familiar with many aspects of the pork business, Jin told Caixin.

## Marathon legal battle

That trust didn’t last. Just a few years later, alarm bells began to go off for the foreign investors. In 2010, Energroup discontinued its reporting with the US Securities and Exchange Commission. Dividends were halted.

As it turned out, Shi had started making behind-the-scenes moves shortly after the reverse merger, Jin said, driving out independent directors and dismissing financial staff hired by the investors.

After years of repeated failed attempts to engage directly with Shi to obtain information about the company’s financial health, the investors in 2014 launched what would become a marathon legal battle.

The fight for information uncovered a series of betrayals by Shi. After court proceedings overseas, the investors won a major victory in 2015 when a US court granted them control of Energroup.

The victory led to more discoveries of the machinations that Shi had carried out without informing investors. They included using forged signatures of Jin Kun, Jin Zhengxin’s father, to sign off on documents that changed PSIC’s board of directors and altered the equity structure of invested companies, according to a statement provided by investors.

Meanwhile, PSIC’s bank records showed that by mid-2021, less than 40,000 yuan (S$7,300) remained in the account that received the foreign investors’ initial US$15.4 million investment.

Several share transfer agreements showed that in 2014, PSIC had agreed to sell its entire stakes in its food and sales subsidiaries to Shi and his wife, for a total of 10 million yuan. Jin Zhengxin said investors were never informed about the transactions, and PSIC’s bank records showed that no corresponding payments were ever received.

## The restructuring mystery

The biggest puzzle for many investors, however, was the 2019 announcement of the bankruptcy restructuring of Chuming and the three subsidiaries it initially controlled.

The investors didn’t even know about the announcement until the following year.

Jin Zhengxin viewed the restructuring – filed not by creditors but by the debtors themselves – as a shell game.

For the investors, the true cause of the restructuring – if there was one – remains a mystery because they have been unable to obtain related materials about the matter.

Jin Zhengxin suggested that the four companies may have inflated their liabilities when filing for bankruptcy restructuring. He cited a roughly 12 billion yuan discrepancy between the liabilities initially recognised by the Dalian Intermediate People’s Court and those later confirmed by the same court following a review by the court-appointed administrator.

Since 2020, the investors’ attempts to review the restructuring documents have encountered obstacles in Liaoning, including from the local market regulator and courts.

For example, late that year, Jin Kun applied to the local market watchdog to register for a change in PSIC’s corporate registration, an investor statement seen by Caixin showed. The request, however, was delayed for several months over bureaucratic technicalities, investors said.

The delay effectively prevented foreign investors from voting at a critical stage of the bankruptcy restructuring proceedings, causing material harm to their interests, the statement said.

## Hitting a brick wall

The investors alleged that the profitable operations of the meat processing company – the only Chuming-branded company left with PSIC after the 2014 deals – had been outsourced in 2017 to a trading company set up by Shi’s team.

The trading company was later sold to Dalian-based Chengsan Group for one million yuan in 2021.

Chengsan’s acquisition took place after it withdrew from the meat processor’s bankruptcy restructuring, under which it would have been required to invest nearly 90 million yuan as a restructuring investor, according to case documents and Caixin interviews.

The investor statement called the move a “malicious transfer” of the meat processor’s assets, adding that it was an important fact ignored by the court-appointed administrator.

The administrator, now known as SGLA Law Firm, has refused to comment on the matter.

In a 2022 ruling, the court rejected a demand from PSIC to review the meat processing company’s accounting vouchers.

Jin Zhengxin argued that the foreign investors could not ascertain what was really going on with the meat processor’s business unless they could see the records in question.

After appealing the decision, PSIC won the right to review the company’s accounting vouchers, but the Liaoning Provincial Higher People’s Court limited the time allowed for the review to 15 days.

Given that the company had more than a decade of records, the investors considered the time limit unreasonable.

The point turned out to be moot, however. By the time the ruling was issued, the meat processor’s factory had been acquired by Chengsan, leaving PSIC without access to the records, Jin Zhengxin said.

On top of all that, the foreign investors were still unclear about what happened to their initial US$15.4 million investment. In their lawsuit against the court-appointed administrator, the Dalian court rejected the investors’ request for access to the meat processing company’s debt registration documents.

The investors didn’t get much help from law enforcement either. Jin Kun filed a criminal complaint in 2021 alleging embezzlement and forgery, but police later declined to open a case, citing a lack of evidence. Although that decision was later revoked on review, the case has seen no meaningful progress since, according to the investors.

Several years after the conclusion of the company’s bankruptcy liquidation, regulatory and registration records show it remains active. For investors, that’s what makes the whole saga so vexing.

“The most astonishing aspect of the entire bankruptcy process is that from the day the meat processing company’s bankruptcy restructuring case was accepted by the court, through the completion of liquidation and up to today, the company has not suspended operations for a single day,” the investor statement read.

And if that’s the case, they ask why they’re not entitled to a portion of the profits. “If the company continued operating after the completion of the liquidation, then where did its operating profits go?” the statement asked. CAIXIN GLOBAL

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.