Gridsum Holding, Inc., Guosheng Qi, Huijie He

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 25822 / September 7, 2023

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 Charges China-Based Big Data Analytics Company with Failure to Disclose Related Party Payments, including more than $5 million that benefited the CEO’s Family

Company also Charged with Misuse and Unreported Use of IPO Proceeds

The SEC today filed a complaint against Gridsum Holding, Inc. (formerly Nasdaq: GSUM) and its CEO Guosheng Qi charging them with misuse and unreported use of funds raised in a 2016 U.S. initial public offering (IPO) as well as failure to disclose millions of dollars in related-party transactions that benefitted Defendant Qi’s family members.  According to the complaint, from September 2016 to 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 mother-in-law.  The complaint alleges that the total value of these related party transactions equaled $7.1 million, and Qi and his family directly or indirectly received at least $5.2 million.

According to the complaint, Gridsum and Qi also falsely stated in Gridsum’s 2016, 2017, and 2018 annual reports that no IPO proceeds were used to pay officers, directors, 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.  According to the complaint, Qi’s wife received approximately $2.5 million of these IPO proceeds.

The SEC’s complaint, filed in federal court in New York, charges Qi and Gridsum with violating the antifraud and other provisions of the federal securities laws.  Specifically, the SEC’s complaint alleges that Qi and Gridsum violated Sections 17(a)(1)-(3) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder; Gridsum violated Sections 13(a) and 13(b)(2)(B) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder; and Qi also violated Exchange Act Rules 13a-14 and 13b2-2, and aided and abetted Gridsum’s violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder.  The SEC’s complaint seeks injunctions against future violations, disgorgement, civil penalties, and an officer and director bar against Qi.  The SEC also seeks disgorgement from relief defendant Huijie He.

The SEC’s investigation was conducted by Michael T. Grimes, Kam Lee, and Shipra Wells, and supervised by C. Joshua Felker and Melissa Hodgman.  Adam Eisner, Michael Grimes, and Kristen Warden will litigate the case, supervised by David Nasse.

The SEC appreciates the assistance of the Public Company Accounting Oversight Board, FINRA, Nasdaq, the China Securities Regulatory Commission, and the Securities & Futures Commission of Hong Kong.