Following a 40% stock drop an investigation on behalf of investors of Advanced Battery Technologies, Inc. (Public, NASDAQ:ABAT) over possible violations of Federal Securities Laws by Advanced Battery Technologies and others was announced.

The investigation by a law firm focuses on allegations that Advanced Battery Technologies may have issued materially false statements to investors about its business and financial condition, including the failure to disclose material related party transactions.
Advanced Battery Technologies reported an increase in its 12months Total Revenue from $31.90million in 2007 to $97.13million in 2010. Its Net Income went from $10.21million in 2007 to $36.73million in 2010.

Shares of Advanced Battery Technologies, Inc. traded in 2006 as low as $0.50 per share and increased in 2007 to as high as $8.33 per share. During 2008 ABAT shares fell to $1.34 per share but increased in 2009 to $4.76 per share. During 2010 ABAT shares traded around $4 per share. During the first months in 2011 ABAT shares traded slightly under $4.
Then on March 30, 2011 an equity research firm called Variant View Research (Variant View) published an article alerting investors to a number of potential red flags of fraud at Advanced Battery.
a Seeking Alpha article with the title: Advanced Battery Technologies: An Egregious Chinese RTO raised serious questions about Advanced Battery Technologies.

Among other things the article raises the following questions:

1. The Chairman appears to have transferred ownership of ABATs key subsidiary to himself without explanation or compensation;
2. ABAT leads investors to think that it makes cutting-edge electric cars, when in fact it produces cheap scooters and bicycles;
3. ABAT claims unrealistic margins in what it admits is a commodity space;
4. ABAT claims to have increased revenue from $4.2 million to $97.1 million from 2005 to 2010 while DECREASING its employee count;
5. ABAT claims distribution relationships which appear to be fake;
6. ABAT is a serial issuer of equity at low prices;
7. ABAT spent $20 million to acquire a company linked to the Chairman without disclosing the relationship;
8. ABAT spent $22 million or 7x sales to acquire a failing and possibly related company;
9. ABAT issued 11 million shares to the Chairman and other individuals to repay a loan which appears to be entirely fabricated;
10. Despite a parade of auditors and multiple restatements, ABAT still has material weaknesses;
11. ABATs RTO promoter, John Leo, is behind a number of suspicious Chinese reverse mergers, most notably CYXI;
12. No fundamental institutions are significant shareholders.

According to the article the author believes that the financial statements and management of ABAT cannot be trusted and therefore the stock is worth zero.

Following the report shares of Advanced Battery Technologies, Inc. fell from $3.5 per share to under $2 during March 30, 2011.