Only four years after its market debut, Yuanda Communication (301139) has received its final regulatory judgment for consecutive financial fraud committed during its IPO phase and after listing. On the evening of August 28, the company announced receipt of a formal Administrative Penalty Decision from the China Securities Regulatory Commission (CSRC).

For fabricating significant false content in its securities issuance documents and containing false records in its 2022 annual report, the company has been ordered to rectify, issued a warning, and fined a combined total of 239 million yuan. Trading in the company's shares will be suspended from market open on August 31, as it has triggered the conditions for mandatory delisting due to major violations. This marks the beginning of the delisting countdown for the telecommunications technical services provider that only joined the ChiNext board in July 2022.

Breaking Down the Violations

Simply put, the company inflated its performance both before and after its listing. In the telecom technical services industry, revenue recognition is inherently prone to manipulation. Yuanda Communication's approach was a classic one: fabricating workload confirmation sheets. In essence, even when work had not been completed or had not started at all, the company would create fake work orders and present them to finance as customer-approved documentation to justify revenue recognition.

The result was that in the pre-IPO period (2019-2021), inflated revenue grew from 8.75% to as high as 16.23% of reported figures. By 2021, one out of every six yuan of reported revenue was fake. It was with this water-downed "report card" that the company passed its review, obtained approval, and raised 1.169 billion yuan from investors. In 2022, its first year after listing, the company continued the fraudulent practice, inflating revenue by 7.87%, showing a persistent pattern of misconduct rather than correction.

Key Details Within the Fine Print

The penalty notice contains several noteworthy details beyond the fine amount. The general manager, identified as "Yan (deceased)," was exempted from punishment, yet was explicitly designated as a "directly responsible supervisor" and involved in the revenue inflation scheme, carrying a more severe designation than director Wu Zhifeng. The untimely death of a key figure raises questions about the circumstances, potentially indicating a lengthy investigation period with unknown events occurring behind the scenes.

CFO Cao Yalei's defense claimed she was "at the very end of the business process" and lacked the opportunity to organize systematic fraud. However, the CSRC's review found evidence that Cao discussed financial data adjustments with finance department staff and arranged for subordinates to execute them. This demonstrates an organized, top-down scheme with division of labor, making her a key operator rather than a scapegoat.

Notably, Cao specifically referenced a "Guangxi company" whose revenue she claimed was genuine. Regulatory review, however, revealed that the project progress confirmation documents Yuanda recorded were inconsistent in both form and content with those actually issued by the Guangxi company. This indicates the company may have forged the client's official seals or documents, a far more serious offense than simply accelerating revenue recognition, as it constitutes outright evidence fabrication.

The company argued there was "no subjective intent" and that revenue recognition differences stemmed from "irregular grassroots business processes." The regulator rejected this defense, signaling that excuses of ignorance or negligence are no longer accepted in financial fraud cases, particularly when forged documents are involved.

Assessing the Real Impact

The fine represents 20% of the fraudulently raised funds (233.8 million yuan) plus an additional 5 million yuan. Having raised 1.169 billion yuan, much of which may already be spent, this penalty represents a devastating cash outflow. Combined with impending investor lawsuits, which could far exceed the fine, the company's capital chain will likely be severely strained.

The mandatory delisting procedure signals the tangible implementation of "zero tolerance" policies. This case demonstrates ex-post accountability for IPO fraud with full-chain liability. While past fraud cases often resulted in minimal fines, regulators are now reclaiming 20% of raised funds and imposing market bans on executives. Under the registration system, even companies listed for four years can be expelled and forced to cough up everything, interest included.

For ordinary investors, identifying such risks involves watching two external signals. First, abnormal gross margins: if a company demonstrates unusually smooth or high margins without corresponding revenue scale advantages compared to peers, caution is warranted. Second, cash flow divergence: if a company reports profits on paper but cash received from sales consistently falls far below operating revenue, it suggests money is trapped in receivables, often indicating inflated paper wealth.

Final Assessment

This case serves as another typical example of ex-post accountability for financial fraud in the A-share market. It demonstrates that while fraudulent market entry may succeed temporarily, regulatory enforcement will eventually catch up. The combination of a 239 million yuan fine, mandatory delisting, and executive bans effectively signals the company's end. The more critical developments to watch will be the scale of investor compensation claims and whether the case extends to include intermediary liabilities for sponsors and other parties involved in the listing process.

According to the company's official announcement, the CSRC determined that between 2019 and 2021, Yuanda Communication inflated revenue by 65.9 million yuan, 160.7 million yuan, and 263.6 million yuan respectively, representing 8.75%, 13.12%, and 16.23% of reported annual revenue. In 2022, the company inflated revenue by 166.2 million yuan, accounting for 7.87% of reported figures. The regulator found that Li Jin, then-chairman, failed to exercise prudent oversight, while the deceased general manager Yan was directly involved in revenue inflation activities. Cao Yalei arranged the revenue inflation activities as chief financial officer. Wu Zhifeng, a director and deputy general manager, failed to prudently review the major business involved. All signatures on the fraudulent documents affirmed their truthfulness, accuracy, and completeness.

The total penalties include a 238.8 million yuan fine for the company, 7.5 million yuan for Li Jin, 6 million yuan for Cao Yalei, and 3 million yuan for Wu Zhifeng. Li Jin received a five-year market ban and Cao Yalei a four-year ban. The company's stock will be suspended on August 31, 2026, and will face mandatory delisting procedures under exchange rules.

The company has extended its apologies to investors and pledged to fulfill information disclosure obligations in accordance with regulatory requirements. Investors are urged to exercise rational judgment and be aware of the investment risks in this situation.