ONE of China’s largest listed drugmakers said related parties used the firm’s funds to trade its shares, a day after the securities regulator alleged financial data had been fabricated.

Shanghai-listed Kangmei Pharmaceutical Co. transferred 8.88 billion yuan (US$1.3 billion) to connected entities to trade its own shares, it said in a filing with the Shanghai Stock Exchange on Saturday.

The management of its capital and related-party transactions had “significant deficiencies,” the firm said, and it sought a risk tag on its stock that will limit its daily moves within 5 percent instead of the normal 10 percent.

Kangmei probably fabricated bank deposits and other financial transactions, and is suspected of buying its own shares through related accounts, the China Securities Regulatory Commission said Friday, following an initial probe.

The company, which produces traditional Chinese medicines, in April said an “accounting error” led it to overstate cash in 2017 by 29.94 billion yuan. One securities lawyer said that amount was unprecedented in China.

Kangmei shares were suspended from trading yesterday. They have lost 28 percent this year, among the worst performances on the MSCI China Index, after the company told investors that it was under investigation in December. Kangmei’s 5.33 percent bond due 2022 plunged 16.4 yuan to a record low of 36 yuan yesterday morning.

The firm has to pay coupon a 1 billion yuan bond June 21 and principal on a 750 million yuan note in September. Calls to investor relations team at Kangmei went unanswered yesterday.

Kangmei has asked the Shanghai Stock Exchange to apply the “special treatment” tag to its shares. The label is intended to remind investors of the risks associated with trading the stock.

The company will urge the related parties to solve the problems related to the fund transfers, it said in the filing.

(SD-Agencies)