Skip to content Skip to navigation

Cemtrex Hid Shady Associates, False Audits, Says Securities Class Action

Share
Cemtrex "C" Logo

The complaint for this securities class action sets forth such a variety of allegations of shady behavior against Cemtrex, Inc. that it’s difficult to believe that a company could conceal so much in a single year. The complaint claims that the company’s public statements were false or misleading, or omitted material facts, in violation of the Securities Exchange Act of 1934.

The class for this action is all persons and entities who acquired Cemtrex’s securities between February 11, 2016 and February 22, 2017.

Cemtrex claims to offer electronic manufacturing services for advanced electric system assemblies, instruments and emission monitors for industry, and industrial air filtration and environmental control systems.

During the class period, the complaint records no signs of difficulties or abnormal operations in the company’s public statements.

The first sign of trouble, according to the complaint, came on February 17, 2017, and it was about Source Capital, a company that had worked as a dealer-manager in a previous Centrex offering. Source Capital’s FINRA and SEC registrations were reportedly listed as “Termination Requested.” At this, the price of Centrex’s shares fell by over 11%.

Less than a week later, on February 22, investor website Seeking Alpha published an article entitled, “Cemtrex: Documents and Photos, All Signs Point to Deception and Failure.” Among other things, the article alleged that Cemtrex was being heavily promoted by a company called Small Cap Specialists (SCS); that companies previously promoted by CSC had been delisted for irregularities or fraud; and that Cemtrex’s Executive Director had paid for the promotion via transfers from “an undisclosed entity” in New York.

The article also claimed that, although the company’s stock price had “soared” because of the promotion, company insiders’ holdings had decreased, although they had not filed the proper forms to disclose the stock sales. The insiders included the company’s CEO, Executive Director, and CFO.

Still other allegations concerned Cemtrex’s audit firm, whose address had been traced to a vacant strip mall. According to the article, the controlling partner of this firm was banned by the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) for performing fake audits, for which they claimed he did little or no work.

According to the article, the auditor is not licensed in Texas, and he did this work under different company names, so that when one was shut down, he’d choose another and go back to auditing the same companies, using the same personnel. The article notes that Cemtrex’s payments for auditing were too low for a company whose operations are supposed to be so extensive. The complaint claims that the auditor was signing off on Cemtrex’s financials with little or no review.

In addition, the article points out investment banks and other firms hired by Cemtrex, such as Source Capital, have represented other heavily-promoted companies and says, “There has been long running and significant involvement with companies, individuals,  or activities implicated in securities fraud.”

At this news, the company’s stock fell by 33.5%.

Article Type: 
Topic: 

Free Case Evaluation

Fill out the information for a FREE and prompt case evaluation.

About you

Additional Information

Latest Tweets

Join Us on Facebook