Zhangzidao's scallops died, starved, and ran away — three times, all fake

Zhangzidao Group farms scallops, sea cucumbers and abalone on the ocean floor off Dalian. Its inventory lives underwater, on 1 million mu of seabed, where independent verification is effectively impossible. On 30 October 2014, the company announced that cold-water currents had killed its scallop crop across 1,056,400 mu, wiping out ¥812 million in value. The first three quarters swung from profit to an ¥812 million loss.

In January 2018, Zhangzidao issued a performance forecast correction that triggered market suspicion. On 12 February 2018, the CSRC opened a formal investigation. In January 2019, the company announced a second disaster: its scallops had starved. A third write-off followed. The repeated 'natural disasters' destroying the same category of inventory became a national joke — 'the scallops ran away' (扇贝跑了) entered Chinese internet slang as a synonym for stock-market fraud.

On 10 July 2019, the CSRC published its findings. The 2016 and 2017 annual reports contained false records: the scallop inventory figures, the asset write-offs, and the sampling results had been fabricated. The company was fined ¥600,000. Chairman Wu Hougang received a lifetime ban from the securities market. Twenty-four other individuals were penalised with fines and market bans ranging from three to ten years.

On 11 September 2020, the CSRC referred the case to public security authorities for criminal prosecution on charges of illegal disclosure and non-disclosure of material information. The case established that biological assets on the ocean floor are not beyond regulatory reach — and that 'the scallops died' is not an audit defence.