An obscure porcelain and education firm is under investigation by a top Chinese regulator after it became one of the most sought-after blockchain stocks last week.

Guangdong Great Wall Group, whose stock price soared for five consecutive days last week after Chinese president Xi Jinping praised blockchain technology, said Monday it was under investigation by the China Securities Regulatory Commission (CSRC).

The investigation comes as the government appeals for “rational” investments in Chinese blockchain and fintech firms.

Great Wall Group, which started off as a creative porcelain firm in 1996, disclosed details about six blockchain projects in its 2018 annual report, but investigators have questioned whether this blockchain push is genuine in light of its recent stock bump.

According to the firm’s filing with the Shenzhen Stock Exchange, investigators are looking at potential violations of information disclosure regulations.

“According to the Securities Law of the People’s Republic of China, the committee of CSRC has decided to open an investigation against the firm,” the filing said.

The firm received an earlier request from ChiNext, a NASDAQ-style board for the Shenzhen Stock Exchange, on Oct. 28, asking the firm to explain how its businesses are related to the blockchain industry, according to a separate filing.

ChiNext required more elaborate explanations on the six research and development projects that firm claimed were related to blockchain, out of 50 projects listed in the 2018 annual report, according to the filing.

The exchange wants to know more details, including the projects’ background, cycles, amounts of investment, research team and specific use cases.

It also asked profits generated from the projects and how much the realized profits and revenue from the projects affect the firm’s total profits and revenue over the last year and the first three quarters of 2019.

According to the firm’s response in the filing, two of the six projects are being developed by its internet training subsidiary Zhiyou Education, which plans to establish a cryptocurrency ecosystem based on its yet-to-be-developed OK Angel Coin software.

“The two projects have not had any impact on our revenue or profits yet,” the firm said.

The other four are from its recently acquired education wing, Emerald Education Group.

“We have lost control over Emerald Education,” Great Wall Group said in a June filing with the Shenzhen Stock Exchange, adding:

“The subsidiary no longer provides any financial statements and reports to us, therefore we are not able to explain how Emerald Education is related to the blockchain technology.”

Great Wall Group filed a lawsuit against Emerald Education Group regarding equity transfer disputes in August.

“We have been unable to control the decision-making process in terms of its recruitment and funds due to resistance from Emerald’s core management team,” the firm said in the filing.

Neither Great Wall Group’s semi-annual or third quarter reports have included Emerald’s financial statements.

The Shenzhen Stock Exchange may suspend trading of Great Wall’s stock if it cannot provide annual reports for two consecutive fiscal years, as it has not been able to include Emerald’s financial statements in them.

Great Wall Group’s market cap is 2.627 billion RMB as of Nov. 4. The company did not immediately return a request for comment.

Chinese flags image via Shutterstock 

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