By Ann C. Logue
The genius of US securities laws is that they mandate full disclosure but don’t regulate much beyond that—relatively speaking, of course. That’s one reason that companies from around the world do their public offerings in the United States.
There are laws and regulations here, however, as GTV Media Group and two affiliated companies, Saraca Media Group and Voice of Guo Media, found out this week. The SEC settled with these businesses for illegal securities sales. The story has a lot of strange aspects to it, but the net effect is that investors will be $539 million richer when the fine is paid.
The SEC press release doesn’t name names, but reporters figured it out in no time. GTV, Saraca, and Voice of Guo are controlled by Guo Wengui, a Chinese investor who is lives in the US, possibly on the lam due to his whistleblowing activities. He has linked up with Steve Bannon, an advisor to Donald Trump who is involved with many media businesses.
Folks in both political and media circles have alleged that Guo was using his companies to spread misinformation and influence Chinese (and American) politics.
But the SEC doesn’t care about the havoc that social media has wreaked on civil society. It does care about unregistered securities offerings. GTV offered common stock without registering with the SEC first. It and Saraca also conducted an illegal unregistered offering of a digital coin, sometimes referred to as G-Coins or G-Dollars. The offerings were promoted on the different sites as well as their social media channels and reportedly brought in $487 million from about 5,000 investors, many of whom are based in the US. Maybe they thought they could get away with it because it was in Mandarin?
Unfortunately for Guo and Co., some investors became concerned and filed a class action suit, asking for proof that they had, indeed, purchased shares in the business. That brought the attention of the Feds.
Although the SEC has talked about the need to regulate digital coin offerings, G-Coins and G-Dollars weren’t the specific focus of this investigation. That doesn’t mean they are legit.