Jia Yueting assumes joint and several liability for compensation, while LeEco was awarded a first instance compensation of 2.04 billion yuan

According to Securities Times on September 22, the reporter learned from lawyers that LeEco's first instance judgment, according to the Beijing Financial Court's judgment, the defendant LeEco Information Technology Co., Ltd. shall pay a total of nearly 2.04 billion yuan in compensation, including investment difference losses, commissions, stamp duty, etc., to the plaintiff investor within ten days from the effective date of this judgment.

Defendant Jia Yueting is jointly and severally liable with the defendant LeTV for the losses suffered by the plaintiff's investors.

In terms of intermediary institutions, the defendant Ping An Securities bears joint and several compensation liability with the defendant LeTV within 10% of the plaintiff's investor's losses.

The defendants, Lianda Certified Public Accountants and Lianda Certified Public Accountants, jointly assume joint and several liability with the defendant LeTV within a range of 1.5% for the losses suffered by the plaintiff's investors.

Huapu Tianjian Certified Public Accountants Co., Ltd. and Rongcheng Certified Public Accountants jointly assume joint and several liability with the defendant LeEco within a range of 1% for the losses incurred by the plaintiff investors who have purchased LeEco stocks after the corresponding date.

The defendant, ShineWing Certified Public Accountants, shall bear joint and several liability with the defendant, LeEco, within a range of 0.5% for the losses incurred by the plaintiff investor who purchased LeEco stocks after the corresponding date.

On August 12, 2010, LeEco landed on the ChiNext board. In 2015, its market value exceeded 170 billion yuan, making it the highest listed company on the ChiNext board at that time.

At the end of 2016, LeEco's funding chain problems erupted and it fell into a debt crisis. In July 2017, Jia Yueting left the United States and has not returned yet.

In April 2019, the China Securities Regulatory Commission announced an investigation into LeEco and Jia Yueting for suspected illegal and irregular information disclosure. On July 21, 2020, LeEco was delisted and its listing was terminated. LeEco's stock price closed at 0.18 yuan on the same day.

According to the market ban decision issued by the China Securities Regulatory Commission in 2021, it has been found that LeEco, Jia Yueting, and others have the following illegal facts:

1、 LeEco engaged in financial fraud from 2007 to 2016, resulting in false records in the documents submitted and disclosed for the initial public offering and listing of stocks, as well as in the annual reports from 2010 to 2016.

The main methods used by LeEco before going public include fabricating business through companies controlled by Jia Yueting, and constructing false fund circulation through bank accounts controlled by Jia Yueting to inflate performance. By fabricating business with third-party companies and constructing false fund circulation through bank accounts controlled by Jia Yueting, performance is artificially inflated. In real business dealings with customers, artificially increasing performance through impersonation and payment collection.

After LeEco went public in 2010, in addition to using its own funds to circulate and colluding with others to fabricate business revenue, it also continued to inflate its performance by forging contracts, using framework contracts that were not actually executed, or unilaterally confirming swap contracts.

2、 LeEco did not disclose related party transactions in accordance with regulations;

3、 LeEco has not disclosed any guarantees provided to companies such as LeEco Holdings;

4、 LeTV did not truthfully disclose the situation of Jia Moufang and Jia Yueting fulfilling their loan commitments to the listed company. It is particularly mentioned that Jia Moufang and Jia Yueting originally promised to lend the funds obtained from reducing their holdings in LeEco stocks to the listed company for supplementary operating funds without interest. In fact, both Jia Moufang and Jia Yueting have withdrawn the loans multiple times. The China Securities Regulatory Commission pointed out that Jia Yueting violated his promise by directly instructing relevant personnel to withdraw his and Jia Moufang's loans, and failed to fulfill his responsibilities diligently. He is the supervisor directly responsible for the false records and significant omissions in LeEco's relevant disclosure documents. Jia Yueting, as the actual controller of LeEco, instructed relevant personnel to engage in the above-mentioned illegal activities, which constitutes the illegal behavior described in Article 193 (3) of the Securities Law.

5、 LeEco's non-public offering of stocks in 2016 constitutes fraudulent issuance:

On August 8, 2016, LeEco went public through a non-public offering. LeEco's non-public offering of 106.643 million new shares raised 4.799 billion yuan, and the disclosed three-year financial data period is from 2012 to 2014 and January June 2015. According to the aforementioned facts about LeEco's financial fraud, LeEco does not meet the issuance requirements and fraudulently obtains issuance approval.

The China Securities Regulatory Commission pointed out that the then Chairman Jia Yueting and CFO Yang Lijie played an organizational, planning, leadership, and implementation role in promoting the above-mentioned issuance and related financial fraud on LeEco. In financial fraud, they used particularly malicious methods such as concealing and fabricating important facts. The amount of fraud was huge, and they did not diligently fulfill their responsibilities. They signed and guaranteed the authenticity, accuracy, and completeness of the information disclosed on the submitted and disclosed issuance application documents. The illegal circumstances were particularly serious, and they were directly responsible for LeEco's fraudulent issuance behavior as the supervisory personnel.

Wu Meng, the then supervisor, and Jia Yuemin, the deputy general manager, directly participated in related financial fraud activities and failed to fulfill their duties diligently. They signed and guaranteed the authenticity, accuracy, and completeness of the information disclosed in the issuance application documents, playing a significant role in fraudulent issuance. The illegal circumstances were relatively serious.

Liu Hong, who was then a director, failed to diligently and responsibly sign and ensure the truthfulness, accuracy, and completeness of the information disclosed in the issuance application documents. He was another directly responsible person for LeEco's fraudulent issuance behavior. Based on the aforementioned facts about LeEco's financial fraud, Jia Yueting, as the actual controller of LeEco, instructed relevant personnel to engage in the above-mentioned financial fraud, resulting in serious false records in the three-year financial data for the period from 2012 to 2014 and January to June 2015, which were disclosed in the company's application for non-public offering, constituting an illegal act as described in Article 189 (2) of the Securities Law.

On April 12, 2021, LeEco announced that it had received an "Administrative Penalty Decision" from the China Securities Regulatory Commission. Due to ten years of financial fraud and failure to disclose illegal facts such as related party transactions in accordance with regulations, the China Securities Regulatory Commission decided to impose administrative penalties on 15 responsible parties, including LeEco and Jia Yueting. LeEco was fined a total of more than 240 million yuan and Jia Yueting was fined more than 241 million yuan.