Guo Wengui sued by media company investors

Runaway Chinese billionaire Guo Wengui holds a press conference on November 20, 2018 in New York City, on the occasion of the death of magnate Wang Jian in France on July 3, 2018.

Don Emmert | AFP | Getty Images

Wealthy Chinese businessman Guo Wengui, a vocal critic of the Chinese government, and several others are accused of violating state securities laws in a class action lawsuit filed in Arizona.

Civilian complaint was filed in late June with the United States District Court for the District of Arizona. The plaintiffs say they tried to invest in GTV Media, a private media company linked to Guo, but have never seen any evidence that their money was actually used for the company.

Lawyers for Guo and other defendants called the allegations “unfounded” in an email to CNBC on Monday.

GTV’s website shows Guo as one of their top attractions and research done by Graphika notes that the company is part of the businessman’s largest media empire.

“Each of these investors did not receive a single penny in return for investing their hard-earned money, even on redemption requests, indicating that the investments were anything but real, let alone risk-free or lucrative.” , indicates the folder. . “Investors also haven’t been given anything that looks like proof of their investment or stake. Instead, they’re left with paper that is worthless or not at all.”

The legal battle could also provide insight into how funds were raised for GTV.

The the Wall Street newspaper reported last year that the fundraising efforts were under investigation by the Securities and Exchange Commission and the Federal Bureau of Investigation. Investigators are said to have investigated GTV Media for possible breach of securities laws.

GTV Media said in a statement to the Journal at the time that it had pursued the private placement under the advice of its lawyers and that “all funds raised are intact”. The company also said it was ready to comply with federal authorities.

Another Journal report said Guo himself was under FBI investigation. An attorney for Guo told the newspaper at the time that Guo had not been contacted by the FBI.

The FBI and SEC did not return requests for comment before publication. Federal investigators have not publicly announced any charges.

Guo has been a vocal critic of the Chinese Communist Party and used his digital live broadcasts on GTV to blow up the heads of the Chinese regime. Guo fled China in 2014 in anticipation accusations of corruption. After criticizing the Chinese leadership, arrest warrants were reportedly issued against his arrest on charges of corruption and bribery. Guo denied the charges.

Former Trump White House chief strategist Steve Bannon has been close to Guo for years. Bannon was involved with the media group, the Journal reported. The newspaper also previously reported on financiers of the same media organization who also allege that they were defrauded. Bannon is not listed as a defendant in the Arizona-based class action lawsuit. A spokesperson for Bannon did not respond to requests for comment.

The Graphika report asserts that Guo-linked companies and foundations constitute a network that “acts as a prolific producer and amplifier of misinformation and disinformation, including allegations of electoral fraud in the United States, false information about Covid-19 and the QAnon stories ”. A representative of Guo has already refuse that the Chinese businessman controls the content on GTV.

The plaintiffs seek damages. He alleges that Guo and other defendants violated several state laws, including the sale of unregistered securities and fraudulent sale of securities.

It is not known how much these investors aim to recover in damages. The complaint alleges that a colleague of Guo’s and a branch of the media company ultimately raised at least $ 117 million from mostly inexperienced investors.

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Lawyers for the plaintiffs listed in the complaint told CNBC they had no interest in turning the case into a media event.

“We do not intend to argue this case in the press. We intend to vigorously pursue this action in court to assert the rights of plaintiffs and other defrauded investors,” the lawyers said in a statement. press release sent by email on Monday.

Lawyers listed as representing Guo and other defendants said they were ready for a legal battle.

“Regarding the Arizona lawsuit, our comment is simply that we will respond and vigorously defend our client in court against all unfounded allegations,” they told CNBC in an email.

A judge ruled this month that Guo and the other defendants have until September to speak with their accusers in order to “provide notice regarding any intention to move to dismiss the complaint and, if so, the grounds on which they intend to move”.

The case might not become a big deal for Guo unless something comes up during the discovery process, according to a lawyer who has been involved in cases against the Department of Justice and the SEC.

“I’m sure Mr. Guo, wherever he is, on any yacht or any lavish palace or apartment, I don’t think it made him sleep less than eight hours. him, I’m sure, the cost of doing business, “Randy Zelin told CNBC.

According to the lawsuit, there were apparently two forms of investment that Guo offered last year in his public broadcasts to those interested in funding GTV Media.

The lawsuit cites public comments made by Guo in which he says those who reach the minimum direct investment of $ 100,000 could go through “private placements”, although the lawsuit says this was “put in place to donate. the supposed imprimatur of a legitimate and honest transaction. and provide a veneer of being available only to qualified investors. “

Guo led investors who couldn’t meet the $ 100,000 threshold to go through Sara Wei, according to the lawsuit. According to Wei’s LinkedIn page, she at least once held a leadership position in another Guo-related media group, Voice of Guo Media. Wei’s lawyer is not on the complaint, and a representative for her could not be reached.

“Investors were told that Ms. Wei was to pool the smaller amounts of money and invest them in GTV through another entity, the defendant Voice of Guo Media, Inc. (“ VOG ”), on their behalf. Each of the plaintiffs and the group were those investors who invested in GTV securities through Ms. Wei and / or VOG, ”the lawsuit said.

A representative from GTV told the Journal last year that he did not accept any money from Voice of Guo Media as part of the fundraiser.

However, the plaintiffs allege that “after taking the money from the investors, Ms. Wei and VOG neither bought shares of GTV nor returned the money to the investors. , or an entity associated with Guo without obtaining shares of GTV; or did a combination of the two. “

The plaintiffs said they and other interested investors were told by Wei that they had to prove they were donors to the Rule of Law Society or the Rule of Law Foundation, two non-profit organizations. profit related to Guo, in order to “qualify to invest.” CNBC reported departures from the boards of directors of the two foundations, including Bannon. Foundation representatives did not return requests for comment.

Ms. Wei told investors, in Chinese, that “the first thing I need from you is your proof of donation to the Rule of Law Foundation,” “the lawsuit said, noting that it was an unofficial translation. Wei continued, according to the costume, “Then you have to tell me if you have more or less than $ 100,000. You have to let me know. If it’s over $ 100,000, I will contact the head office, if it’s less than $ 100,000, we VOG will collectively do it for you. “

Investors ended up worrying about their initial investments in GTV. They inquired, but did not receive “no concrete information was communicated by the defendants”, indicates the lawsuit.

Wei originally told investors last year, according to the complaint, that “the delay in confirming receipt of investor transfers and countersigning the limited-purpose agency agreement was due to Wells Fargo’s and Chase have put some of the funds on hold.

The plaintiffs also claim that it was still unclear what happened to their investments even as federal authorities began to investigate and Wei reportedly said she was able to secure the funds released by the banks.

After the federal investigation into GTV’s fundraising practices became public, investors who sent their money through Voice of Guo began requesting refunds from Wei and Guo himself, according to the legal complaint.

“Between August 2020 and the end of this year, Ms. Wei continued to ask VOG investors to wait patiently while she and her associates allegedly contacted more than 8,000 VOG investors to confirm receipt of their transfers before. to be able to issue refunds. Periodically, investors were asked to fill out Google forms designed to collect identifying information about the transfers they made, “the lawsuit said.

Guo and Wei also had a fallout, which further complicated matters, according to the lawsuit.

“Based on information and beliefs, towards the end of 2020, Mr. Guo and Ms. Wei would have had a fallout, which resulted in the termination of VOG and Ms. Wei’s supposed reimbursement process,” the report said. trial. “With each holding a portion of the $ 117 million, Mr. Guo and Ms. Wei each began to blame themselves for defrauding the investors who sent money to Ms. Wei and / or VOG.”

The lawsuit adds, “In 2021, Ms. Wei and Guo began telling investors that they could no longer repay investments due to the ongoing SEC investigation.”

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