That is a very simple variation of pump and dump scheme. Basically, the same old pump and dump, but the "pump" and "dump" are split, and are done in different countries:

1. A rich guy in China goes and makes a back room deal with a new wiz kid on the block with a promise to prop up his hot startup, thus initiating a "pump" part in a pump and dump. Usually the capital is injected through legal shells and one day funds to obscure the origin.

2. PR companies are hired to hype up the co as the next big thing since sliced bread

3. More back room deals are made with institutional players, to have them add more seemed legitimacy to the operation: investment funds, big name underwriters, 3rd tier American VCs, all kinds of other big name boys.

4. Then, a complex shell structure - VIE is built around the company in an offshore heaven country. That is to give the co. a material constitution outside of China's legal reach.

5. The co. goes for IPO in USA

6. The original Chinese rich guy dumps his stock of a VIE in USA, cash gets sent to his US account, completing the "dump" part of the scheme. Whatever happens next with the company, does no longer matter.