Claim $4.5 billion! 2,000 investors sued 21 defendants, including LeTV

Although LeTV has been delisted, its impact on the capital market is still fermenting.

On the evening of January 17, Shanxi Securities issued an announcement that on January 13, Zhongde Securities, a holding subsidiary of the company, received a civil complaint from the Beijing Financial Court on the dispute over securities misrepresentation liability.

According to the announcement, 2,000 plaintiffs, including Shanghai Junying Asset Management Partnership (Limited Partnership), filed a civil lawsuit with the Beijing Financial Court against 21 defendants including LeTV, demanding that LeTV compensate for investment losses totaling 4.571 billion yuan caused by its misrepresentation behavior, and requiring the other 20 defendants to bear joint and several liability for compensation, including three securities companies. Zhongde Securities was one of the twenty-one defendants and was required to bear joint and several liability for compensation.

LeTV was found guilty of "five deadly sins"

The 2016 fixation constitutes a fraudulent offering

On 2 April 2021, the CSRC issued the Administrative Penalty Decision ([2021] No. 16), which determined that LeTV had violated laws and regulations and imposed administrative penalties on 14 natural persons, including LeTV and Jia Yueting. Among them, the total fine for LeTV is 241 million yuan, and the total fine for Jia Yueting is 241 million yuan.

Previously, on July 21, 2020, LeTV had terminated its listing, and the closing price of the last trading day was fixed at 0.18 yuan per share. According to the listing rules, Due to fraudulent delisting, LeTV cannot be re-listed.

There are five main violations of laws and regulations that the CSRC finally determined for LeTV:

First, LeTV's financial fraud from 2007 to 2016, its submission and disclosure of the application for initial public offering of shares and listing (hereinafter referred to as the IPO) related documents and 2010 to 2016 annual reports have false records; second, LeTV did not disclose related party transactions in accordance with regulations; third, LeTV did not disclose the guarantee for LeTV Holdings and other companies; fourth, LeTV did not truthfully disclose the performance of loan commitments by Jia Moufang and Jia Yueting to listed companies Fifth, LeTV's non-public issuance of shares in 2016 constituted a fraudulent issuance.

The reason why Zhongde Securities became the twenty-one defendants in the LeTV case this time is related to the non-public offering of LeTV in 2016.

According to relevant information, LeTV's fixed increase in 2016 raised a total of 4.8 billion yuan, and the objects of issuance were Caitong Fund, "Niu Shan" Zhang Jianping, Harvest Fund, and China Post Venture Fund. Zhongde Securities acted as the sponsor and lead underwriter, and pulled Zhongtai Securities to serve as the joint lead underwriter.

Retrospectively, LeTV's IPO sponsor was Ping An Securities.

As can be seen from the announcement on the evening of January 17, the liability of intermediary institutions, including Zhongde Securities, has also been officially identified: 3 securities companies and 3 accounting firms such as Zhongde Securities have borne joint and several liability for failure to exercise due diligence and fail to discover leTV's financial fraud. Therefore, Zhongde Securities was prominently listed among the twenty-one defendants of LeTV.

In 2016, Sino-German Securities was fined 6 million

It is worth mentioning that It is not the first time that Zhongde Securities has been exposed to failing to be diligent in the project.

In September 2016, Li Qingzhong and Wang Xin, the sponsors of Zhongde Securities and Financial Advisory, received the Administrative Penalty Decision letter from the CSRC for "failing to exercise due diligence as the financial adviser of Tibet Unigroup Zhuoyuan Equity Investment Co., Ltd." in the equity transfer of *ST Kunji. According to the provisions of the Securities Law at that time, the CSRC decided to order Zhongde Securities to make corrections, confiscate 3 million yuan of business income, and impose a fine of 3 million yuan; give Warnings to Li Qingzhong and Wang Xin and impose a fine of 50,000 yuan each.

Judging from the huge amount of money involved in LeTV, if Zhongde Securities is judged to bear joint and several liability this time, it may have a greater drag on the performance of Shanxi Securities Investment Bank.

According to the data of Oriental Wealth Choice Financial Terminal, Zhongde Securities achieved a main underwriting income of 103 million yuan in 2021, with a market share of 0.29%, ranking 47th (according to the statistics of issuer statements). The net income of investment bank fees of Shanxi Securities in the first three quarters of 2021 was 313 million yuan. If the 21 defendants of LeTV are liable on average, Shanxi Securities may incur non-recurring losses of up to 200 million yuan. However, how much liability Shanxi Securities will eventually bear still needs to be determined by the court. The company also pointed out in the announcement: "In view of the fact that the case has not yet been heard, it is currently impossible to judge the impact on the company's profit in the current period or after the period".

Reporters| Wang Yandan| Wu Yongyong, He Xiaotao, Wang Jiaqi, and Yi Qijiang

Proofreader | Sun Zhicheng

| the original article of the daily economic news nbdnews |

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