Muddy Waters Research recently published a report suggesting that NQ Mobile, a publicly traded mobile security firm that sells anti-malware software around the world, is a "massive fraud." These accusations are no joke, and it was a scary report to read. The biggest issue appears to be with NQ Mobile's finances and alleged falsifications of its user base.
NQ Mobile has reportedly said that it's market share in China is roughly 55 percent, but Muddy Research thinks the company's real share is closer to 1.5 percent of the market, which means there's a huge discrepancy in the user base numbers. As a result, NQ Mobile's revenues are also being called into question, and Muddy Waters thinks about 72 percent of its $32.2 million in revenues are "fictitious."
Worse, the company claims that the software NQ Mobile does sell is actually just "spyware," and it's deeming NQ Antivirus 7.0 "unsafe for sale to consumers" and open for attack from the Chinese government.
"NQ was caught red handed by China's largest television news organization, CCTV, installing malware on phones in order to sell them the cure," Muddy Waters alleges, while calling the company's management "fraudsters." It also points to a "shell company" called Yidatong, which it says is both a part of NQ Mobile but also the company's largest customer. Furthering the accusations, Muddy Waters claims NQ Mobile may have hired Omar Khan, who came from Samsung, as a co-CEO in an effort to establish a "front," in the U.S.
NQ Mobile CEO Omar Khan responded in a statement to Reuters. "We know no better method than to just completely open up the kimono and say, "here's our cash balances by account'," Khan said. In another statement provided to TechnoBuffalo, NQ Mobile said the report was "false and inaccurate." The company said "the allegations fail to take into account various factors necessary to understand the matters addressed," and that it makes "many misrepresentations about the company, its management team, as well as misrepresentations about its products, business practices and how it interacts with its partners." NQ said it will take legal action to defend itself, but also published a complete table of its deposits into various bank accounts.
The claims are scary at best, and shares of NQ Mobile on the NYSE have been halted following the report. NQ Mobile's full response, including its bank deposits, are included below.
NQ Mobile™ Responds to the Allegations Raised by a Research Report Dated October 24, 2013
|BEIJING and DALLAS, Oct. 25, 2013 /PRNewswire/ — NQ Mobile (NYSE: NQ), a leading global provider of mobile Internet services, today responded to the allegations raised in a research report by Muddy Waters dated October 24, 2013. The company believes that the allegations and accusations set forth in the Muddy Waters report (the "Report") are false and inaccurate and contain numerous errors of facts, misleading speculations and malicious interpretations of events. Further, the allegations fail to take into account various factors necessary to understand the matters addressed. Finally, the Report makes many misrepresentations about the company, its management team, as well as misrepresentations about its products, business practices and how it interacts with its partners. The company intends to take all appropriate legal actions to defend itself against these charges and to protect the interest of shareholders.(Logo: http://photos.
|NQ Mobile Announces Formation of Independent Special Committee|
BEIJING and DALLAS, Oct. 25, 2013 /PRNewswire/ — NQ Mobile (NYSE: NQ), a leading global provider of mobile Internet services, announced that the Company's board of directors today formed an independent special committee to conduct an independent review of the allegations raised in a report issued by Muddy Waters dated October 24, 2013. The special committee is comprised of four independent directors of the Company, Ms. Ying Han and Messrs. William Tiewei Li,Xiuming Tao and Jun Zhang, with Ms. Han being the chairwoman of the committee. The committee is authorized to retain independent advisors in connection with its investigation. (Logo: http://photos.
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