Jia Yueting is restricted from high consumption due to failure to fulfill a fine of 241 million yuan in issuance | Finance | High consumption

According to the China Execution Information Disclosure Network, due to Jia Yueting's failure to fulfill his payment obligations as determined by effective legal documents on time, the Beijing Financial Court recently issued a consumption restriction order against Jia Yueting. The applicant is the China Securities Regulatory Commission, which involves an administrative non litigation enforcement case.

The consumption restriction order points out that Jia Yueting is restricted from carrying out the following high consumption and non essential consumption behaviors for daily life and work: when taking transportation, he should choose a second-class or higher cabin by plane, train soft sleeper, or ship; High consumption in hotels, nightclubs, golf courses, and other places above star level; Purchase real estate or construct, expand, or renovate high-end houses; Lease high-end office buildings, hotels, apartments, and other places for office work; Purchase non essential vehicles for business operations; Tourism and vacation; Children attend high paying private schools; Pay high premiums to purchase insurance and wealth management products; Other non essential consumption behaviors for daily life and work, such as taking all seats on G-prefix high-speed trains and first-class or above seats on other high-speed trains. If the above-mentioned prohibited consumption activities are carried out due to daily necessities, an application should be submitted to this court and approved before proceeding.

On April 3, 2023, it was reported that Jia Yueting had added a new equity freeze information. The frozen equity target enterprise is LeTV Information Technology Co., Ltd., with a total amount of RMB 46.808 million and case number Jing 74 Zhi 94. The freeze will be enforced by the Beijing Financial Court from March 31, 2023 to March 30, 2026.

According to the website of the China Securities Regulatory Commission on the evening of April 13, 2021, the China Securities Regulatory Commission (CSRC) has launched an investigation and trial into the illegal and fraudulent issuance of information by LeEco, involving 15 responsible parties such as LeEco and Jia Yueting. Among them, LeEco was fined more than 240 million yuan by the CSRC, and Jia Yueting was fined more than 241 million yuan. The China Securities Regulatory Commission has also decided to impose a lifetime ban on Jia Yueting and Yang Lijie, the then CFO of LeEco, from entering the securities market.

10 consecutive years of inflated performance

After investigation, it has been found that LeEco, Jia Yueting, and others have the following illegal facts. One reason is that 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. Secondly, LeEco did not disclose related party transactions in accordance with regulations. The third issue is that LeEco has not disclosed any guarantees provided to companies such as LeEco Holdings. Fourthly, LeEco did not truthfully disclose the situation where Jia Moufang and Jia Yueting fulfilled their loan commitments to the listed company. The fifth issue is that LeEco's non-public offering of stocks in 2016 constituted fraudulent issuance.

Among them, according to the investigation by the China Securities Regulatory Commission, LeEco engaged in financial fraud from 2007 to 2016. The documents related to its application for initial public offering and listing, as well as the annual reports from 2010 to 2016, submitted and disclosed by LeEco, contained false records.

Specifically, in 2007, LeEco falsely increased its revenue by 9.3995 million yuan and its profit by 8.7023 million yuan; In 2008, there was an inflated income of 46.1552 million yuan and an inflated profit of 43.0825 million yuan; In 2009, there was an inflated income of 93.7576 million yuan and an inflated profit of 88.8318 million yuan; In 2010, there was an inflated income of 99.618 million yuan and an inflated profit of 94.4342 million yuan; In 2011, there was an inflated income of 69.3765 million yuan and an inflated profit of 65.2913 million yuan; In 2012, there was an inflated income of 89.6533 million yuan and an inflated profit of 84.451 million yuan; In 2013, there was a false increase in income of 199.9817 million yuan and a false increase in profit of 193.3969 million yuan; In 2014, there was an inflated income of 35.19419 million yuan, an inflated cost of 5.9038 million yuan, and an inflated profit of 34.27038 million yuan; In 2015, there was an inflated income of 399.2239 million yuan, a reduced cost of 9.434 million yuan, and an inflated profit of 382.9518 million yuan; In 2016, there was an inflated income of 51247 million yuan, an inflated cost of 30.8515 million yuan, and an inflated profit of 432.7633 million yuan.

From the perspective of operational techniques, during the initial issuance stage, LeEco inflated its performance through fictitious business and false payments to meet the conditions for listing and issuance, and continued until after listing. Specifically, it includes: LeEco fabricating business with third-party companies and artificially increasing performance through the construction of false fund circulation through bank accounts controlled by Jia Yueting. 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 income, it also continued to inflate its performance by forging contracts, using framework contracts that were not actually executed, or unilaterally confirming swap contracts.

The above-mentioned behavior of falsely increasing performance by LeEco for 10 consecutive years has resulted in false records in its IPO prospectus and annual reports from 2010 to 2016, which violates the provisions of Article 63 of the Securities Law and constitutes the illegal disclosure of information as described in Article 193 of the Securities Law. 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.

Recognized as fraudulent issuance

The administrative penalty decision shows that based on the fact of financial fraud on LeEco, LeEco does not meet the issuance conditions and fraudulently obtains issuance approval, constituting the illegal act of fraudulent issuance as described in the Securities Law.

Among them, the then chairman Jia Yueting and the CFO Yang Lijie played an organizational, planning, leadership, and implementation role in promoting the above-mentioned issuance and financial fraud issues 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 were not diligent and responsible. 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.

China Securities Regulatory Commission: Refusal to accept Jia Yueting's defense opinions

Although the parties involved and their representatives raised unequal defense opinions in the hearing and defense materials regarding the determination of LeEco's financial fraud, Jia Yueting also believed that he should be given a lighter or mitigated punishment. However, according to the administrative penalty decision, the China Securities Regulatory Commission did not accept Jia Yueting's defense opinions.

Finally, the China Securities Regulatory Commission decided to impose a total fine of RMB 240.6 million on LeEco, RMB 241.2 million on Jia Yueting, and impose varying degrees of fines on other responsible persons.

At the same time, lifelong securities market access restrictions will be imposed on Jia Yueting and Yang Lijie, and corresponding access restrictions will also be imposed on other responsible persons.

The China Securities Regulatory Commission pointed out that from the date of announcement of the decision, Jia Yueting and others shall not continue to engage in securities business in their original institutions or serve as directors, supervisors, and senior management personnel of the original listed company or non listed public company, nor shall they engage in securities business or serve as directors, supervisors, and senior management personnel of other listed companies or non listed public companies in any other institutions during the period of prohibition.

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