Guosheng Qi; Gridsum Holding Inc.; and Relief Defendant Huijie He

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26190 / December 10, 2024

Securities and Exchange Commission v. Guosheng Qi and Gridsum Holding, Inc. and Relief Defendant Huijie He, No. 1:23-cv-07924 (S.D.N.Y. filed Sept. 7, 2023)

SEC Obtains Judgment Against China-Based Big Data Analytics Company and Its CEO for Misuse and Unreported Use of IPO Proceeds and for Failing to Disclose Millions of Dollars in Related Party Payments

The Securities and Exchange Commission announced that on December 3, 2024, the U.S. District Court for the Southern District of New York entered a judgment against Gridsum Holding, Inc. (formerly Nasdaq: GSUM), a China-based data analytics company; its CEO Guosheng Qi; and Qi’s wife, Relief Defendant Huijie He, in an SEC case charging Qi and Gridsum with defrauding investors through their misuse and unreported use of funds raised in a 2016 U.S. initial public offering, as well as their failure to disclose millions of dollars in related-party transactions that benefitted Qi’s family members.

The SEC’s complaint, filed on September 7, 2023, alleges that Gridsum and Qi falsely stated in Gridsum’s 2016, 2017, and 2018 annual reports that no IPO proceeds were used to pay officers or directors of the company, or their associates. The SEC alleges that instead, Gridsum’s officers, directors, and associates received approximately $3.8 million of IPO proceeds that were paid from U.S. bank accounts that Qi controlled, including approximately $2.5 million that were directed to Qi’s wife.

The Complaint also alleges that between September 2016 and June 2020, Gridsum and Qi directed a series of undisclosed payments to Qi’s wife and mother-in-law for supposed consulting contracts between Gridsum and a company controlled by Qi’s family members. The Complaint alleges that the total value of these related party transactions equaled $7.1 million, of which Qi and his family directly or indirectly received at least $5.2 million.

The judgment, entered on the basis of default, enjoins Qi and Gridsum from violating the anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 17(a) of the Securities Act of 1933; enjoins Gridsum from violating Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder, and Section 13(b)(2)(B) of the Exchange Act; and enjoins Qi from aiding or abetting violations of Section 13(a) of the Exchange Act and Rules 12b-20 and13a-1 thereunder, and from violating Exchange Act Rules 13a-14 and 13b2-2. The judgment also prohibits Qi from acting as an officer or director of any public issuer, and orders Qi and He, as a relief defendant, jointly and severally to pay disgorgement of $5,244,969 and prejudgment interest of $1,852,185. It further orders Qi to pay a civil penalty of $5,244,969 and Gridsum to pay a civil penalty of $576,158.

The SEC’s investigation was conducted by Michael Grimes and Kam Lee, and supervised by Josh Felker. The SEC's litigation was conducted by Kristen Warden and Adam Eisner with assistance from Shipra Wells in the Division of Examinations and Donald Hong in the Division of Economic and Risk Analysis, and supervised by David Nasse.