DOJ Seizes $214 Million From Alleged Chinese Stock Scheme

DOJ Seizes $214 Million From Alleged Chinese Stock Scheme

The U.S. Attorney’s Office, Northern District of Illinois, seized $214 million in an ongoing case alleging that seven people defrauded investors by manipulating shares of China Liberal Education Holdings, Ltd. (CLEU), which can now be returned to victims.

“Our attorneys and staff in this case placed a high priority on recovering funds for victims,” U.S. Attorney for the Northern District of Illinois Andrew Boutros said on May 28.
A grand jury handed up an indictment in March, alleging the seven individuals residing in Taiwan and Malaysia had defrauded American investors. The funds were in U.S. custody, and a judge’s order on May 27 allows the permanent forfeiture of the $214 million from defendants and for the government to return funds to the victims.

According to prosecutors, the defendants engaged in a “pump and dump” scheme wherein individuals in China posed as investment advisers based in the United States and made misleading promotions of CLEU stock, causing share prices to artificially rise before the defendants dumped their stock on the market.

Prosecutors allege the defendants profited significantly at the expense of defrauded investors. A court document shows that amounts between $18 million and $72 million were seized from individual defendants’ accounts.

CLEU was traded on the Nasdaq stock exchange. In SEC filings, CLEU stated it was a Cayman Islands-incorporated company with a mission to “provide China’s students with the tools to excel in a global environment.” It operated through subsidiaries in China.

The company reported losses of $1.2 million in 2021, $1.9 million in 2022, $4.8 million in 2023, and $4.7 million for the first six months of 2024, according to court documents. CLEU did not respond to an inquiry from The Epoch Times by the time of publication. On May 22, the company issued a news release notifying investors that Nasdaq had issued a letter of delinquency.

The complaint filed by prosecutors seeking forfeiture of funds gave examples of alleged victims, who said they were contracted through WhatsApp messages after clicking on Facebook advertisements, and advised by individuals claiming to be investment advisers to buy CLEU stock within a specific window of time.

“According to records obtained by law enforcement during this investigation, the WhatsApp accounts used by the purported U.S.-based investment firms and advisors were actually used by individuals in China,” the complaint reads.

FBI special agent in charge of the Chicago field office Douglas DePodesta said in a statement that in this case, law enforcement and government officials were able to “successfully recover victims’ hard-earned money before it disappeared into overseas bank accounts.”

“This elaborate fraud scheme boasting bogus profit potentials has caused extensive harm to unsuspecting Americans,” he said.

The forfeiture comes as state and federal lawmakers are urging the Securities and Exchange Commission to delist Chinese companies. They point to cases where American investors were defrauded and say that there is a pattern. Notably, the majority of Chinese companies listed on American stock exchanges are variable interest entities, which exist in a legal gray area subject to dissolution if the Chinese regime so orders.

The lawmakers are asking for SEC investigations into these companies, under the suspicion that many already do not meet listing requirements and should be removed under existing law.

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