China's Sino-Forest Corp, which is under investigation by Canadian regulators and police over allegations of dodgy accounting, has issued a report rejecting claims it was a "Ponzi scheme".
The Toronto-listed company, which operates forest plantations in China, said Tuesday an investigation by an independent committee had found Sino-Forest did not misstate its revenue or exaggerate its timber holdings.
The Ontario Securities Commission and Royal Canadian Mounted Police have launched investigations into Sino-Forest after Hong Kong-based Muddy Waters Research, which has targeted a string of Chinese firms over alleged fraud, said the company had cooked its books.
"We can categorically say Sino-Forest is not the 'near total fraud' and 'Ponzi scheme' as alleged by Muddy Waters," Judson Martin, vice-chairman and chief executive of Sino-Forest, said in a statement.
Sino-Forest was the largest forestry company on the Toronto Stock Exchange before the Muddy Waters report in June led to a 60-percent plunge in the value of its shares.
Shareholders reportedly lost billions of dollars when the company's stock tanked, including high-profile US hedge fund firm Paulson & Co.
The ongoing scrutiny of Sino-Forest comes amid other accounting scandals involving Chinese firms listed in the United States and elsewhere, which have sparked falling stock prices, trading halts and investigations.
Canadian regulators suspended trading in Sino-Forest shares in August, saying the firm and its executives "appear to have misrepresented some of its revenue and/or exaggerated some of its timber holdings."
Faced with the mounting allegations, Chairman and Chief Executive Allen Chan resigned days later.
In the same month, Standard and Poor's downgraded the debt rating of Sino-Forest and then withdrew its ratings altogether, saying it believed fraud allegations against the firm would stick.
Moody's also downgraded the embattled company's debt rating.
"A great deal of financial and reputational damage has been caused by unfounded accusations made by a short-seller, who we understand personally profited a great deal from the losses of others," Martin said, referring to Muddy Waters.
"We are reserving our rights to respond to this matter."
But Muddy Waters, which is run by Carson Block, dismissed the results of the investigation as having "no credibility" and said the findings were in response to a criminal investigation launched by Canadian federal police last week.
"It should be noted that all three directors who oversaw the investigation are defendants in shareholder lawsuits, and one of the three resigned just prior to this release," Muddy Waters said in a statement on Wednesday.
The Royal Canadian Mounted Police's financial fraud unit is probing whether the company defrauded investors by overstating the value of its forest assets and revenues, the daily Globe and Mail said last week, citing sources familiar with the investigation.