Chinese Regulator Investigates Firm's Blockchain Efforts Amid Stock Surge

An obscure porcelain and education firm is under investigation by a top Chinese regulator after it became one of the most sought-after blockchain stocks last week.

Guangdong Great Wall Group, whose stock price skyrocketed for five consecutive days last week after Chinese president Xi Jinping praised blockchain technology, said Monday it was under investigation by the China Securities Regulatory Commission.

The investigation comes as the government appeals for "Rational" investments in Chinese blockchain and fintech firms.

Great Wall Group, which started off as a creative porcelain firm in 1996, disclosed details about six blockchain projects in its 2018 annual report, but investigators have questioned whether this blockchain push is genuine in light of its recent stock bump.

According to the firm's filing with the Shenzhen Stock Exchange, investigators are looking at potential violations of information disclosure regulations.

The firm received an earlier request from ChiNext, a NASDAQ-style board for the Shenzhen Stock Exchange, on Oct. 28, asking the firm to explain how its businesses are related to the blockchain industry, according to a separate filing.

ChiNext required more elaborate explanations on the six research and development projects that firm claimed were related to blockchain, out of 50 projects listed in the 2018 annual report, according to the filing.

"The two projects have not had any impact on our revenue or profits yet," the firm said.

"We have been unable to control the decision-making process in terms of its recruitment and funds due to resistance from Emerald's core management team," the firm in the filing.

The Shenzhen Stock Exchange may suspend trading of Great Wall's stock if it cannot provide annual reports for two consecutive fiscal years, as it has not been able to include Emerald's financial statements in them.