Fraudulent Chinese companies pose a risk to U.S. markets and investors should weigh whether to allocate capital to them, said short-seller Carson Block.

"I don’t think there’s any parallel in the history of capital markets where you’ve had this systemic issue of literally hundreds of frauds going to another country’s capital market to suck up capital and expatriate it to their home country," Block said at the Bloomberg Invest conference in New York Tuesday.

Block, who runs Muddy Waters, pointed to the documentary ’The China Hustle,’ which found that there were 400 fraudulent Chinese companies listed in the U.S. in the last decade from the People’s Republic of China.