SEC Charges Restaurant Food Distribution Company HF Foods Group Inc. with Fraud

ADMINISTRATIVE PROCEEDING
File No. 3-21959

June 6, 2024 - The Securities and Exchange Commission today announced settled charges against HF Foods, a Nevada-based food service distributor to Asian restaurants in the United States, resulting from materially false and misleading disclosures and other fraudulent conduct implemented by its former Chairman and CEO Zhou Min Ni and former CFO Jian Ming "Jonathan" Ni.

The SEC's order finds that, from August 2018 through 2020, Zhou Min Ni, with the assistance of Jonathan Ni, misappropriated approximately $3.4 million from HF Foods, through related party transactions and otherwise, for the benefit of himself and his family, including to purchase and maintain a stable of luxury vehicles for the personal use of Zhou Min Ni and his family. Additionally, in anticipation of a 2018 reverse merger between a predecessor entity to HF Foods and a special purpose acquisition company ("SPAC"), Zhou Min Ni and Jonathan Ni schemed to remove liabilities from the predecessor company's books by creating a fictitious line of credit in the name of a purported supplier to conceal future repayments on the liabilities. According to the order, after the reverse merger, pursuant to which HF Foods became a public company, HF Foods converted the line of credit into promissory notes to continue concealing the fraudulent conduct. As a result of the above misconduct, from 2018 to 2020, HF Foods's public filings contained both materially inaccurate financial statements and other false and misleading statements, including materially false statements regarding related party transactions and executive compensation. The order also finds that Zhou Min Ni, as Chairman and CEO of HF Foods, and Jonathan Ni, as CFO of HF Foods, reviewed and signed filings by HF Foods containing materially false and misleading statements.

HF Foods, on a neither admit nor deny basis, offered to settle the matter by agreeing to the issuance of an order finding that it violated Section 17(a) of the Securities Act of 1933, and Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B), and 14(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 12b-20, 13a-1, 13a-11, 13a-13, 13a-15(a), and 14a-9 thereunder; ordering it to cease and desist from committing or causing any violations or any future violations of those statutory provisions and rules, and ordering it to pay a civil monetary penalty of $3.9 million. In determining to accept the offer, the Commission considered remedial acts promptly undertaken by HF Foods and cooperation afforded to the Commission staff.

On June 3, 2024, the Commission filed a settled district court action against Zhou Min Ni and Jonathan Ni in U.S. District Court for the District of Columbia.

The SEC's investigation was conducted by Brian S. Kang and Jeffrey R. Anderson, with assistance from Howard Kaplan, John B. Timmer, James Connor, and Melissa Armstrong, under the supervision of Kevin Guerrero, Peter Rosario, Stacy L. Bogert, and Mark Cave.

• Order - HF Foods Group Inc.