The stock price of NQ Mobile Inc (ADR) (NYSE:NQ) skyrocketed today after the Chinese mobile internet service provider announced that its internal investigation did not find any evidence of fraud.

NQ Mobile

The shares of the company are trading $10.52 per share, up by nearly 38% at the time of this writing, around 1:37 PM ET in New York today.

Muddy Waters, the research firm headed by short seller Carson Block, alleged that NQ Mobile Inc (ADR) (NYSE:NQ) committed “massive fraud” by overstating its revenue and misrepresenting its cash balances. The Chinese mobile internet service provider repeatedly denied the allegations. Early this year, Block urged PricewaterhouseCoopers, the auditor of NQ Mobile, to closely examine NQ mobile’s books.

Internal investigation findings

An independent special committee of the board of directors of NQ Mobile Inc (ADR) (NYSE:NQ) together with its independent counsel Shearman & Sterling LLP and forensic accountant, Deloitte & Touche Financial Advisory Services Limited, conducted the internal investigation.

The investigation team found that the cash balances of the company were verifiable and consistent with public disclosures, no evidences showing revenues were inconsistent with public disclosures, and it did not make major payments during the period under review except for legitimate business purposes to benefit the company and its shareholders, among others.

NQ Mobile Inc (ADR) (NYSE:NQ) emphasized that the “investigation team did not find any evidence that the company had engaged in the fraudulent conduct alleged by Muddy Waters,” and it did not make effort to evaluate the judgment of the research firm regarding the soundness of its business strategy.

Block’s reaction to NQ Mobile’s internal probe findings

In an e-mailed statement to Bloomberg, Block maintained his position that NQ Mobile Inc (ADR) (NYSE:NQ) is “unequivocally a fraud.” He added, “This press release is just another in a long line of whitewash carried out by China companies that are defrauding U.S. investors, written by directors in China who have no accountability to U.S. authorities.”

“By the committee’s own admission, there was significant data tampering. It’s therefore ridiculous that the committee, which is comprised entirely of Chinese directors who are de facto unaccountable to U.S. authorities, can claim to have concluded there was no wrongdoing.”

Missing information

A related report from our colleague Michelle Jones emphasized a paragraph in the press statement of NQ Mobile Inc (ADR) (NYSE:NQ) wherein it admitted that “the investigation team observed indications the some information might be missing, and the company’s management and staff were unable to provide a credible explanation for what the Investigation Team observed.”