On September 7, 2011 an anonymous blogger on GeoInvesting.com blew a whistle so loud that an 86.7 million dollar company may tumble.

“We here at Glaucus Research follow the U.S.-listed Chinese space closely, so we were naturally curious. We decided to investigate the allegations of fraud,” states the research firm in their report released Tuesday alleging China Medical Technologies has defrauded investors by, among other things, overpaying for acquisitions from undisclosed related parties.

China Medical is a medical device company that manufactures and markets immunodiagnostic and molecular diagnostic products for the detection of various cancers, diseases, and disorders, as well as companion diagnostic tests for targeted cancer drugs.

According to the Glaucus Research report, China Medical paid $28 million for Beijing Bio-Ekon Biotechnology from a seller believed to be secretly related to China Medical's Chief Executive Xiaodong Wu, a radically steep price compared to the $5-$8 million value suggested a buy-out of minority shareholders a few months before the sale. The report claims Wu embezzled roughly $20 to $23 million from the public company through the deal.

Additionally, the report alleges China Medical sold its primary business segment, high intensity focused ultrasound, to Wu to cover up a Chinese FDA suspension of the company’s permit to sell the devices, rendering the segment worthless.

China Medical has adamantly denied the allegations in the report, stating that it “concerns matters which have long been disclosed in the company's annual reports and press releases, misrepresents the information they present and attributes motives to management that are based on innuendo and fail to take into account business and commercial considerations relevant to the matters discussed.”

In the report, Glaucus Research does disclose potential bias, stating, “Obviously, we will make money if the price of CMED’s stock declines. You can publicly access any piece of evidence cited in this report or that we relied on to write this report. Think critically about our report and do your own homework before making any investment decision.”

Seeking Alpha contributor Paul Nouri questioned the report’s findings, noting, “There are reasons to be cautious when considering an investment in China Medical, one being the previously mentioned high level of accounts receivable. Another being the high price tag of its acquisition of the SPR technology in 2008 and the existing amount of debt it has left the company with. However, the Glaucus report attempts to connect many dots that don’t show the entire picture.”

China Medical shares dropped 23.96 percent yesterday.