The SEC has charged exiled Chinese businessman Miles Guo and his financial advisor, William Je, for their involvement in unregistered and fraudulent offerings that raised more than $850 million. The charges include misappropriation of funds, violations of registration provisions of securities laws, and material misrepresentations to prospective investors.
Misappropriation of Funds
Guo and Je misappropriated a large portion of the funds raised from investors to enrich themselves and their family members. They allegedly diverted $100 million of investor funds to a hedge fund for the sole benefit of a company owned by Guo’s son. Guo also misappropriated investor proceeds in two other offerings to fund his and his family’s lifestyle, including using $40 million to purchase and renovate a mansion in New Jersey and $3.5 million to purchase a Ferrari for his son.
Violations of Registration Provisions
Guo, Puerto Rico and New York-based G Club Operations LLC, and New York-based Mountains of Spices LLC were charged with violations of the registration provisions of securities laws in connection with these offerings. A fourth offering, for which Guo alone is charged, raised hundreds of millions of dollars from investors through a crypto asset security referred to as “H-Coin,” “Himalaya Coin,” or “HCN” and a related purported stablecoin.
Material Misrepresentations to Prospective Investors
Since at least October 2021, Guo allegedly made material misrepresentations to prospective investors in H-Coin, falsely stating that 20 percent of H-Coin’s value was backed by gold and that he would personally compensate investors for any potential losses.
Consequences of the Charges
The SEC’s complaint seeks permanent injunctions against Guo and Je, disgorgement of ill-gotten gains, civil penalties, and officer and director bars. The SEC’s complaint also seeks a conduct-based injunction that prohibits Guo from participating in the issuance, purchase, offer, or sale of any securities, including crypto-asset securities, other than for his own personal accounts. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York also announced charges against Guo and Je.
Related Case
In a related matter, in September 2021, the SEC charged GTV and two other entities with conducting an illegal unregistered offering of the company’s common stock and GTV and its parent company with an illegal unregistered offering of crypto asset security referred to as either G-Coins or G-Dollars. The SEC subsequently collected more than $454 million in disgorgement, prejudgment interest, and penalties, including approximately $70 million previously transferred to the hedge fund discussed above, from GTV and two other charged entities. The SEC is distributing the funds collected to harmed investors.
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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
