Roth Capital Partners

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Roth Capital Partners, LLC
Industry Finance and insurance
Founded 1984; 34 years ago (1984)
Headquarters California, USA
Key people
Byron Roth (Chairman and CEO)
Products Investment banking
Financial services
Revenue Increase US $ 55 million (2007)
Number of employees
135 (2007)

Roth Capital Partners, LLC is a small investment banking firm[1] headquartered in Newport Beach, California.[2] Since inception in 1984, ROTH has been a small and microcap stock underwriter.[2]

The company has been widely criticized and accused of fraud for its underwriting practices and the deals it has promoted.[3][4][5]

The firm was featured in the 2017 financial documentary The China Hustle for its underwriting relationships with dubious Chinese companies that led to crisis-level losses for American stockholders in the wake of the 2008 financial crisis while making windfall profits for the firm,[6][7] and for hosting what has been described as "bacchanals" in which emerging companies woo investors amid topless models[2] and extravagant music acts such as Kid Rock, Pitbull and Snoop Dogg.[8][9]


The firm was founded by Walter Cruttenden III in 1977. When Byron Roth later joined, the firm was renamed Cruttenden Roth.[3] In February 2000 the firm changed its name to Roth Capital Partners, Inc.[10]

Criticism of underwriting practices and allegations of fraud

In 1998 the Los Angeles Times reported that Roth had been criticized for its underwriting practices, citing the company's role in the initial public offering of Aviation Distributors Inc., which later faced multiple shareholder lawsuits alleging the company had manipulated it's revenues in order to boost the company's stock price. The company initially went public at $5 per share and later traded as high at $12.88 per share before falling to just 97 cents per share following the announcement of the lawsuits.[3]

PIPE Financing

In August 2006, The New York Times reported that brokerage firms that underwrite "private investment in public equity" (PIPE's) were being examined by regulators concerned that the firms were tipping off clients to deals and that Roth had ranked as one of the largest firms offering PIPE's, with 20 deals in the first half of 2006 alone.[11]

In August 2010, Barron's reported that Roth's promotional materials claimed that it had "pioneered" the practice of PIPE financing and had helped raise more than $2.8 billion for 67 U.S.-listed Chinese companies.[5]

Barron's has also cited questions raised by investors about Orient Paper, China Natural Gas and China Green Agriculture, firms underwritten by Roth, and which were later investigated for fraud by the SEC.[5][12][13]

Reverse mergers

In 2011, Reuters reported that Roth had become a leading investment bank underwriting Chinese reverse mergers which led to a number of "spectacular" collapses of Chinese stocks listed on American exchanges and cost U.S. investors billions of dollars and that led to multiple investigations.[14]

In October 2011, The Wall Street Journal reported that one of Roth's clients, China Biotics, was delisted from the NASDAQ in June 2011, just months after Roth helped the company raise more than $79 million from U.S. investors. China Biotics’ auditor, BDO, subsequently resigned after making accusations that the company had falsified documents, overstated the company's assets and that irregularities it discovered "likely constitute illegal acts." In October 2011 the SEC suspended trading in China-Biotics.[15]

In August 2012, The Seattle Times reported that HQ Sustainable Maritime Industries stock had sank from a high of $15 per share to just 10 cents, after the company’s auditing firm resigned alleging the company’s management had obstructed inquiries into its finances. The company's shares were later delisted by the Securities and Exchange Commission, which also opened a formal investigation into the company. The company's investors later filed a federal class-action lawsuit, citing “substantial evidence of fraud,” and naming Roth, who underwrote stock offerings that raised about $23 million for the company.[16]

In September 2013 The Washington Post reported that in January 2010 Roth had arranged an IPO through a reverse merger for China Electric Motor Company (NASDAQ: CELM). After the IPO, Roth issued five “buy” ratings on the stock. About a year later, China Electric delayed its 10-K filing with the SEC due to "financial-statement discrepancies," trading in the stock was halted and the company's auditor, MaloneBailey, resigned. In October 2011, the Nasdaq delisted CELM and U.S. investors lost millions.[17]

Digital Domain IPO and Bankruptcy

In 2012, The Palm Beach Post reported that three federal class-action lawsuits had been filed that alleged Digital Domain had lied about it's financial condition at the time of its initial public offering, and named Roth, who as the company's lead underwriter was responsible for ensuring the truthfulness and accuracy of the statements, as a defendent. Digital Domain filed for Chapter 11 bankruptcy less than 10 months after its initial public offering, wiping out $400 million in market value and rendering the stock essentially worthless.[18][19]

In 2014 the state of Florida filed a lawsuit, naming Roth as a defendant, alleging conspiracy to commit fraud, that Roth had concealed a liquidity crisis at Digital Domain, which it called a "de facto Ponzi scheme"[20] and had duped Florida governor Charlie Crist as well as other Florida politicians out of more than $80 million in grants as it descended into bankruptcy.[21][22]

Wall Crossing

In April 2018 financial media outlet ValueWalk reported that Roth acted as sole underwriter for a Blockchain offering by Inpixon (Nasdaq: INPX), whereby select investors were given access to material non-public information in advance of the public that allowed them to profit at their expense. The article described the Wall crossing transaction as "spectacularly sketchy," and questioned its legality.[23]

Feature in The China Hustle documentary

The firm was featured in the 2017 financial documentary The China Hustle for its underwriting relationships with dubious Chinese companies that led to crisis-level losses for American stockholders in the wake of the 2008 financial crisis while making windfall profits for the firm.[6][7]


The firm's promotional activies have been compared to the lavish parties of Drexel Burnham Lambert’s of the mid-1980s, which were nicknamed “The Predator’s Ball”.[24] In February 2007, The New York Post reported that Roth took several hundred of its clients to a Cancun-meets-Wall Street-themed lollapalooza. The primary feature of Roth’s event was the presence of “several dozen” topless Asian models, with the ticker symbols of the companies Roth underwrote body-painted on.[24]

In August, 2011, Reuters reported that the firm, just hours after the Public Company Accounting Oversight Board issued a warning about Chinese reverse mergers, for which Roth was a leading underwriter, threw a “Miami Glam” party in which guests were surrounded by rhinestone-encrusted sculptures of leopards while bikini-clad hostesses served cotton candy as rapper Pitbull put on a concert.[14]

See also

External links

  • ROTH Capital Partners, LLC corporate website


  1. ^ Swann, Christopher (18 June 2014). "Elon Musk's Halo Effect". The New York Times. Retrieved 29 March 2015. 
  2. ^ a b c "ROTH CAPITAL'S $LEAZE TO PLEASE". New York Post. 2007-02-05. Retrieved 2018-05-19. 
  3. ^ a b c O'DELL, JOHN (1998-11-12). "Founder Leaves, Passing Reins at Cruttenden Roth". Los Angeles Times. ISSN 0458-3035. Retrieved 2018-07-25. 
  4. ^ Chu, Kathy (2012-11-12). "Reversing Course on China". Wall Street Journal. ISSN 0099-9660. Retrieved 2018-07-29. 
  5. ^ a b c Norton, by Bill Alpert and Leslie P. "Beware This Chinese Export". Retrieved 2018-07-29. 
  6. ^ a b Goldstein, Gary. "Financial documentary 'The China Hustle' details alleged U.S.-China collusion". Retrieved 2018-05-19. 
  7. ^ a b Editorial, Reuters. "Special Report: China's shortcut to Wall Street". U.S. Retrieved 2018-07-29. 
  8. ^ "Conferences mix business with hip-hop, pop". 2006-02-23. Retrieved 2018-05-19. 
  9. ^ "Jed Rothstein's The China Hustle pulls back the curtain on a new ticking time bomb in the financial markets". Retrieved 2018-06-13. 
  10. ^ Jones, Dow (2000-02-19). "Banker Cruttenden Roth Says It Will Change Name". Los Angeles Times. ISSN 0458-3035. Retrieved 2018-08-12. 
  11. ^ Anderson, Gretchen Morgenson and Jenny. "Secrets in the Pipeline". Retrieved 2018-08-12. 
  12. ^ Eden, Scott (2011-01-12). "SEC Probing China Green Ag". TheStreet. Retrieved 2018-07-29. 
  13. ^ "The Rosen Law Firm Files Class Action on Behalf of Orient Paper, Inc. Shareholders – ONP". Retrieved 2018-08-12. 
  14. ^ a b Editorial, Reuters. "Special Report: China's shortcut to Wall Street". U.S. Retrieved 2018-07-29. 
  15. ^ Rapoport, Michael (2011-10-08). "Trading Suspended in Another China Firm". Wall Street Journal. ISSN 0099-9660. Retrieved 2018-07-29. 
  16. ^ "Settlement near in suit over alleged fraud at HQ Sustainable Maritime". The Seattle Times. 2012-08-25. Retrieved 2018-08-12. 
  17. ^ "China Electric Motor's reverse takeover leads to major losses, numerous lawsuits in U.S." Washington Post. Retrieved 2018-08-12. 
  18. ^ "3 lawsuits accuse Digital Domain of lying about financial status". palmbeachpost. Retrieved 2018-08-17. 
  19. ^ Agrawal, Tanya. "Titanic effects creator Digital Domain bankrupt, sale agreed | Reuters". U.S. Retrieved 2018-08-17. 
  20. ^ "Florida lawsuit calls Digital Domain "de facto Ponzi scheme"". Retrieved 2018-08-17. 
  21. ^ "Florida Claims Filmmakers Defrauded It". 2014-08-15. Retrieved 2018-08-17. 
  22. ^ Gleason, Stephanie (2014-07-23). "Florida Sues Former Digital Domain Executives". Wall Street Journal. ISSN 0099-9660. Retrieved 2018-08-17. 
  23. ^ "If Inpixon's Sketchy Deal Is Legal The Public Markets May Be in Deep Trouble". ValueWalk. 2018-04-30. Retrieved 2018-08-17. 
  24. ^ a b "ROTH CAPITAL'S $LEAZE TO PLEASE". New York Post. 2007-02-05. Retrieved 2018-05-19. 
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