U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22932 / February 24, 2014
Accounting and Auditing Enforcement Release No. 3540 / February 14, 2014
Securities and Exchange Commission v. China MediaExpress Holdings, Inc. and Zheng Cheng, Civil Action No. 1:13-cv-00927 (D.D.C.)
Court Enters Final Judgment by Default Against SEC Defendant Zheng Cheng
The Securities and Exchange Commission ("Commission" or "SEC") has announced that on February 19, 2014, the Honorable Ellen S. Huvelle, United States District Court Judge for the District of Columbia, issued a final judgment by default against Defendant Zheng Cheng ("Cheng"), the Chairman and CEO of China MediaExpress Holdings, Inc. ("China Media"), a China-based media and advertising company, whose stock was previously publicly traded in the United States. The final judgment permanently enjoins Cheng from future violations of various provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Exchange Act Rules 13a-14, and 13b2-2. The final judgment further permanently bars Cheng from serving as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act, and also holds him liable for total combined disgorgement and prejudgment interest of $17,718,359.07, and a civil monetary penalty in the amount of $1,500,000.
On June 20, 2013, the SEC filed a complaint against China Media and Zheng (collectively, the "Defendants") alleging that from at least October 2009, the Defendants engaged in a scheme to mislead and defraud investors by, among other things, grossly overstating China Media's cash balances. The complaint alleged that after China Media materially misrepresented its financial condition and business operations, its stock price tripled to more than $20 per share, making the company attractive to the investing public and allowing it to raise more than $53 million from stock sales to investors. The complaint further alleged that, among other things, Cheng knowingly signed public filings with the Commission in which China Media materially misrepresented its cash balances and business operations, and that he improperly sought to influence the result of an independent investigation of the authenticity of bank records and other documents China Media provided its external auditor by attempting to bribe a member of the investigative team.
In a previous order issued on October 9, 2013, Judge Huvelle also entered final judgment by default against China Media, permanently enjoining the company from future violations of various provisions of the federal securities laws and also holding the company liable for total combined disgorgement and prejudgment interest of $41,894,082.05, and a civil monetary penalty in the amount of $7,250,000.
For further information, please see Litigation Release Number 22731(June 20, 2013) [SEC Charges China-Based Company and CEO in Latest Cross Border Working Group Case].