New Oriental Education & Technology Group Inc sank to a five-year low on Wednesday, leading declines in New York-traded Chinese stocks, after short seller Muddy Waters LLC said financial statements at its units are fraudulent.

The education company's American depositary receipts fell 35 percent to the lowest level since 2007, a day after losing 34 percent on Tuesday, when New Oriental said it was being investigated by the US Securities and Exchange Commission.

Muddy Waters questioned the ownership of some of New Oriental's schools and the consolidation of their financial statements with the parent company.