A federal grand jury in the District of Columbia has indicted a Hong Kong man accused of running a complex scheme that used fabricated SEC filings and sham advisory firms to promote and dump the stock of Chinese-linked companies, generating as much as $211 million in sales and leaving retail investors with massive losses.
A grand jury returned an indictment charging Guanhua Su, 37, of Hong Kong, who also uses the name “Michael Su,” in a conspiracy to file false and deceptive investment adviser forms with the U.S. Securities and Exchange Commission. Prosecutors say Su operated as a managing director and marketing director of Rhino Consulting Business Service Ltd and helped create at least 10 shell entities that posed as legitimate financial advisers. Those fake filings allegedly lent credibility to sham firms that were then used to push securities to U.S. retail investors.
The false adviser filings included fabricated details about principal places of business, public company status, chief officers, and disclosures about private funds. Two entities named in the indictment — Bluesky Eagle Capital Management LTD and Wisdom Capital Management Group LTD — are singled out for filings that prosecutors say contained deliberate misstatements. According to court papers, the filings were part of a broader effort to use fake adviser identities to lure investors through social media and WhatsApp chats.
Prosecutors say co-conspirators leveraged the sham adviser identities to tout a NASDAQ-listed Cayman Islands company with business in China, at times using a variable interest entity structure. Promoters in WhatsApp chats allegedly promised returns of 300-500% and assured investors they would be fully compensated for any losses, statements that helped persuade retail accounts to buy into the promotions. The indictment describes those pitches as central to a coordinated campaign to inflate buying pressure and then cash out through foreign brokerage accounts.
“Today’s indictment charges the defendant for his alleged role in a complex securities fraud scheme that caused hundreds of millions of dollars in investor losses,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division. “The Criminal Division is fully committed to stopping foreign actors who victimize American retail investors. Under my leadership, the Criminal Division will aggressively investigate and prosecute criminals who steal the hard-earned savings of U.S. citizens through fraud and deceit.”
The indictment alleges that foreign-based brokerage accounts sold the promoted company’s shares for gross proceeds of as much as $211 million. On April 17, 2024, the promoted company’s stock reportedly plunged by approximately 88%, wiping out the value of positions held by many retail investors and crystallizing the losses tied to the alleged scheme. Authorities say the timing of promotions, coordinated trading, and rapid sales point to an orchestrated dump after luring buyers with false adviser endorsements.
“The investing public relies on the accuracy and integrity of materials filed with the SEC,” said SEC Inspector General Kevin B. Muhlendorf. “The SEC-OIG will tirelessly investigate domestic and foreign actors who seek to abuse the SEC’s processes for malicious purposes.” On Nov. 13, the SEC brought civil actions against several entities the Department charged in connection with the false filings, naming Bluesky Eagle, Supreme Power Capital Management LTD, AI Financial Education Foundation Ltd., AI Investment Education Foundation Ltd., Invesco Alpha Inc., Adamant Stone Ltd., and Wisdom Capital in different districts.
Su faces criminal counts including conspiracy to commit securities fraud, making material misstatements in a report filed with the SEC, and false statements. If convicted, the defendant faces a maximum penalty of five years in prison for each count, according to the indictment. The case was investigated by the SEC-OIG, with assistance noted from FINRA’s Surveillance and Market Intelligence – Market Abuse Group.
Trial Attorney Matthew Reilly of the Criminal Division’s Fraud Section is prosecuting the matter on behalf of the Department of Justice. The charges underscore the risks posed by sham advisers and cross-border promotion tactics that exploit social platforms, and they reflect a coordinated enforcement response aimed at deterring similar schemes that prey on individual investors.
