China’s CSRC Cracks Down on *ST Zhuoran Fraud Case

China’s securities regulator has moved to punish one of its own listed companies for severe financial fraud, announcing a proposed 12.5 million yuan (about $1.75 million) fine against Shanghai Zhuoran Engineering Technology Co. Ltd. and a 10-year securities market ban on its actual controller, according to a Xinhua News report published on September 11, 2026.

The China Securities Regulatory Commission (CSRC) said *ST Zhuoran (stock code 688121.SH), a STAR Market-listed petrochemical equipment maker, had inflated profits and filed false records in its periodic reports over multiple years, seriously violating securities laws. The case may trigger a major-illegal-conduct forced delisting, and the Shanghai Stock Exchange (SSE) will launch delisting procedures in accordance with the law.

The Penalties at a Glance

According to the CSRC’s administrative penalty pre-notification, reported by China News Service citing the regulator’s official WeChat account, the proposed sanctions are sweeping:

• A 12.5 million yuan fine on the listed company.
• A combined 35.8 million yuan in fines on six responsible individuals.
• A 10-year securities market ban on the actual controller.
• A formal case opening against the accounting firm involved in the audit, with severe punishment for those found to have failed their due diligence duties.
• Referral of any potential criminal leads to public security organs under the principle of “transferring all that should be transferred.”

The dual-track approach — penalizing the company, holding executives personally accountable, and pursuing the gatekeeper auditor — reflects the regulator’s increasingly assertive “full-chain accountability” enforcement strategy.

A Company That Peaked at Listing

Shanghai Zhuoran is a large petrochemical equipment integration service provider serving refining, petrochemical, and natural gas chemical clients. It listed on the STAR Market in September 2021 at an IPO price of 18.16 yuan per share, as detailed by China Fund News / Tonghuashun.

Its performance has declined steadily ever since. Revenue fell from 3.9 billion yuan in 2021 to 2.84 billion yuan in 2024, while net profit dropped from 315 million yuan to about 94.8 million yuan over the same period. In its 2025 performance express, revenue slid a further 23.11% to 2.18 billion yuan, and non-GAAP net profit swung into a loss of 21.17 million yuan — a stark reversal from a profit of 81.48 million yuan the prior year.

Investor confidence has tracked that decline. The share price fell 9.98% to 10.92 yuan on December 22, 2025, after the investigation was disclosed, and by April 30, 2026 — the last trading day before suspension — it had slumped to 6.48 yuan, more than 64% below its IPO price, leaving a market capitalization of just 1.514 billion yuan.

How the Case Unfolded

The fraud allegations did not emerge overnight. On December 19, 2025, the Shanghai Securities Regulatory Bureau issued an administrative regulatory measure against the company, finding that between 2021 and 2024 it had illegally paid out part of its IPO-raised funds through bank accounts of suppliers and fund channels effectively controlled by controlling shareholder and chairman Zhang Jinhong, forming an off-book capital pool. The company failed to truthfully disclose the deposit and actual use of those funds, and failed to disclose related-party non-operating fund dealings. Zhang Jinhong, then-CFO Wu Yutong, and then-board secretary Zhang Xiaoyu received warning letters.

The same day, the CSRC opened a case against Zhuoran and Zhang Jinhong for suspected information disclosure violations — which the company disclosed publicly on December 20, 2025, as noted by Jiemian News.

The problems compounded in 2026. The company failed to complete its 2025 annual report by the April 30 statutory deadline, and trading was suspended from May 6, 2026, when it also received a CSRC case-opening notice for failing to disclose its periodic report on time. On August 5, the SSE sent a regulatory work letter warning of potential major-illegal-conduct forced delisting, after the Shanghai Securities Regulatory Bureau notified the company of preliminary findings that some annual financial information was suspected of false records — a step confirmed in the company’s own announcement published via ifeng.

On July 7, 2026, trading resumed under a delisting-risk warning, and the A-share abbreviation became “*ST Zhuoran.” On September 9, the company announced the CSRC’s preliminary finding of suspected false records; two days later, the regulator issued the formal penalty pre-notification.

The Two-Track Delisting Threat

Zhuoran now faces delisting on more than one front. The “*ST” prefix denotes the SSE’s delisting-risk warning, applied because the company failed to disclose its 2025 annual report within the statutory period. Had it remained unable to disclose the report within two months of the warning, it would have faced termination of listing even before the fraud-based path was resolved.

The second, more serious path is the potential major-illegal-conduct forced delisting tied to the financial fraud finding. As of September 11, the case remains at the “administrative penalty pre-notification” stage — not yet a final decision — meaning the delisting outcome depends on the CSRC’s eventual formal ruling.

Why It Matters

The Zhuoran case is a window into Beijing’s broader campaign to clean up its capital markets. By pairing severe corporate penalties with accountability for the auditing gatekeeper and the referral of criminal leads to police, the CSRC is signaling that fraud will not stop at the company gate. For a STAR Market designed to champion hard-tech champions, the case is also a cautionary tale: a firm that peaked on its listing day and never recovered, with governance failures that regulators say were baked into its disclosure from the start.

The forced-delisting mechanism, if applied, would send a powerful deterrent message to other listed companies — particularly smaller STAR Market issuers whose valuations hinge on trust in their disclosures.

What to Watch

The next milestone is the CSRC’s final administrative penalty decision, which will determine whether the major-illegal-conduct forced delisting is formally triggered. Also worth watching is the investigation into the accounting firm and whether any criminal referrals materialize into prosecutions. For investors still holding *ST Zhuoran shares, the prospect of both a fraud-driven and a disclosure-failure-driven delisting leaves little room for optimism.

As Yicai summarized in its market brief, the regulator’s message is unambiguous: *ST Zhuoran inflated profits in relevant years, and the exchange will now proceed with delisting procedures in accordance with the law.