Since July 2012, pursuant to an Order by the Grand Court of the Cayman Islands, CMED has been under the control of Joint Official Liquidators.

In 2009, an anonymous letter alleging possible illegal and fraudulent activities by management since 2007 was sent to KPMG Hong Kong, then CMED's auditor.

In November 2012, the liquidator filed a complaint with the Hong Kong Police Force and the US Federal Bureau of Investigation (FBI), alleging that $400 million that CMED raised in stock and bond sales has gone missing, and that the CEO's wife had gambled substantial sums at the Wynn and Bellagio casinos in Las Vegas, Nevada.

[10][18][19] Paul Weiss as part of its investigation conducted on-site visits and interviews in China and collected documents from employees and servers of CMED.

[10] In November 2012, the liquidator filed a complaint to the Hong Kong Police Force and the US Federal Bureau of Investigation (FBI) alleging that $400 million that CMED raised in stock and bond sales had gone missing, and that the CEO's wife had gambled substantial sums at the Wynn and Bellagio casinos in Las Vegas, Nevada.

[11] Two of CMED's creditors said the CEO's wife gambled $62 million in slot machines at the Bellagio casino in Las Vegas between 2008 and 2012.

[23] Creditors' law firm Stroock & Stroock & Lavan said the wife's tax returns for 2009-11 showed $17 million of "gambling winnings" as income, along with matching "gambling losses", as to which the lawyers said: "This huge 'gambling' cash flow is inconsistent with [the wife]'s banking records and gives rise to a strong suspicion that [she] may have engaged in money laundering and tax evasion.

[15][24][25] Judge Abrams held that while audit committees play a critical role in monitoring corporate management and a corporation's auditor pre-bankruptcy, the justifications for protecting attorney-client communications “dissipate in bankruptcy.”[24] In March 2017, the U.S. Department of Justice in Brooklyn, New York, criminally indicted CMED founder and CEO Xiaodong Wu, as well as former Chief Financial Officer Tak Yung Samson Tsang, charging them with securities fraud and wire fraud conspiracy for stealing more than $400 million from investors as part of a seven-year scheme.

[14] Wu and Tsang also allegedly halted public disclosures of material events affecting CMED's securities and stopped making interest payments.

[14] FBI Assistant Director-in-Charge William Sweeney said “Wu and Tsang led their victims down a narrow path of deceit.

[27] In November 2017, 91 partners of the auditor KPMG faced contempt proceedings in Hong Kong High Court, as CMED liquidators took action against KPMG with regard to its refusal honor a February 2016 court order to produce Chinese working papers, correspondence, and records to the liquidators.

[17] “Perhaps locking up 91 KPMG partners over Christmas may spur the firms to find a solution to this problem”, said Professor Paul Gillis of Peking University’s Guanghua School of Management.