SEC v. Guosheng Qi; Gridsum Holding Inc.; and Huijie He, No. 1:23-cv-07924, Southern District of New York (Sept. 7, 2023) — Complaint

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UNITED STATES DISTRICT COURT
SOUTHERN DISRICT OF NEW YORK

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

vs.
GUOSHENG QI and GRIDSUM HOLDING
INC.,

                       Defendants, and

HUIJIE HE,

                       Relief Defendant.

 Case No.  1:23-cv-7924

JURY TRIAL DEMANDED

COMPLAINT

Plaintiff Securities and Exchange Commission (the “Commission” or “SEC”), alleges as
follows for the period from September 2016 to June 2020 (the “Relevant Period”), concerning
Gridsum Holding Inc. (“Gridsum”), a publicly traded company whose shares traded on the Nasdaq
Global Select Market (“Nasdaq”), and Guosheng Qi (“Qi”) Gridsum’s CEO (collectively,
“Defendants”):
SUMMARY

1. This case involves Defendants’ misuse and unreported use of funds raised in a 2016
initial public offering (IPO) as well as Defendants’ failure to disclose millions of dollars in related-
party transactions that benefitted Defendant Qi’s family members.
2.  Within days of Gridsum’s IPO and continuing for three years, Gridsum, and Qi
directed a series of undisclosed payments to Qi’s wife and mother-in-law for supposed consulting

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contracts between Gridsum and a company controlled by Qi’s mother-in-law.  The total value of
these related party transactions equaled $7.1 million, and Qi and his family directly or indirectly
received at least $5.2 million.
3. Gridsum and Qi also falsely stated in Gridsum’s 2016, 2017, and 2018 annual reports
that no IPO proceeds were used to pay officers, directors, or their associates.  In fact, Gridsum’s
officers, directors, and associates received approximately $3.8 million of IPO proceeds that were
paid from U.S. bank accounts that Qi controlled.  Qi’s wife received approximately $2.5 million of
these IPO proceeds.
4. As a result of the conduct alleged herein, Defendants Qi and Gridsum have
committed securities fraud and other securities violations.  Defendant Qi also aided and abetted
some of Gridsum’s violations.  The violations alleged in this Complaint were part of a scheme
among the defendants to use IPO proceeds and other Gridsum funds to enrich Qi.
5. Qi and Gridsum violated, and unless restrained and enjoined may continue to violate,
Sections 17(a)(1)-(3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)(1)-(3)],
Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)]
and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
6. Gridsum violated, and unless restrained and enjoined may continue to violate,
Sections 13(a) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(a) and 78m(b)(2)(B)] and
Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§240.12b-20 and 240.13a-1].
7. Qi also violated Exchange Act Rules 13a-14 and 13b2-2 [17 C.F.R. §§240.13a-14
and 240.13b2-2], and aided and abetted Gridsum’s violations of Section 13(a) of the Exchange Act
[15 U.S.C. § 78m(a)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§240.12b-20 and
240.13a-1].

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JURISDICTION AND VENUE
8. This Court has subject matter jurisdiction over this action pursuant to Sections 20
and 22 of the Securities Act [15 U.S.C. §§ 77t and 77v], Sections 21 and 27 of the Exchange Act
[15 U.S.C. § 78u and 78aa], and 28 U.S.C. § 1331.
9. In connection with the conduct alleged in this Complaint, Defendants, directly and
indirectly, singly or in concert with others, have made use of the means or instrumentalities of
interstate commerce or the mails in connection with the acts, practices, and courses of business
alleged herein.
10. Venue lies in this District under Section 22(a) of the Securities Act [ 15 U.S.C.
§ 77v(a)] and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)] because, among other things,
some of the acts, practices, transactions, and courses of business alleged in this Complaint occurred
within the Southern District of New York and were effected, directly or indirectly, by making use of
means or instrumentalities of transportation or communication in interstate commerce, or the mails,
or the facilities of a national securities exchange.  For example, during the Relevant Period, the
Company’s stock was publicly traded on Nasdaq, located in the Southern District of New York.  In
addition, several individuals residing in the Southern District of New York purchased and sold
Gridsum stock during the Relevant Period.  The false and misleading statements identified in this
Complaint were directed to investors located in the Southern District of New York.
DEFENDANTS
11. Qi, age 39, served at all relevant times as Gridsum’s Chief Executive Officer (CEO),
Chairman of its Board, and as one of Gridsum’s founders.  Qi founded Beijing Gridsum in 2005
when he was a student at Tsinghua University.  Qi holds a bachelor’s degree in computer science
from Tsinghua University.  Qi is a resident of Beijing, China and Hong Kong.
12. Gridsum, is a cloud-based analytics company that commenced operations in
December 2005 in China with the establishment of Beijing Gridsum Technology Co., Ltd.  Gridsum

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later established five additional operating companies in China and incorporated Gridsum Holding
Inc., under the laws of the Cayman Islands on July 21, 2014, as the parent holding company and the
vehicle for listing in the U.S.  Gridsum conducts operations in China principally through a complex
variable interest entity (“VIE”) structure with Gridsum Holding (Beijing) Co., Ltd. (“Gridsum
Beijing”) as its parent and its subsidiaries.  Gridsum’s founder, CEO, and Chairman (Guosheng Qi)
is the majority owner of Gridsum Beijing.  Gridsum consolidated the financial statements of
Gridsum Beijing and its subsidiaries as a VIE under U.S. Generally Accepted Accounting Principles
(“ US GAAP”).  From September 23, 2016, when it completed its IPO, until April 5, 2021, when it
went private, Gridsum was a foreign private issuer and an emerging growth company who had a
class of securities registered with the Commission under Section 12(b) of the Exchange Act.
During that period, Gridsum filed annual reports with the Commission on Form 20-F, electing to
prepare its financial statements in accordance with US GAAP.  Gridsum’s American Depository
Shares (“ADS”) were listed on Nasdaq under the trading symbol “GSUM.”  On April 5, 2021,
Gridsum went private pursuant to Rule 13e-3 under the Exchange Act through a merger agreement
and filed a Schedule 13E-3.  Gridsum, the surviving entity of the merger, bought back its ADSs for
$2 per share, and withdrew its registration with the Commission.
RELIEF DEFENDANT
13. Huijie He (“Ms. He”), age 41, is a resident of Beijing, China and Hong Kong. Ms.
He is the wife of Gridsum’s CEO, Qi, and purportedly serves as Gridsum’s Vice President of
Business Development.  Ms. He also uses the name “Scarlett.”
OTHER RELATED ENTITIES AND PERSONS
14. Yaping Yu (“Yu”), age 65, resides in Lanzhou City, Gansu Province, China.  Yu is
the mother of Ms. He and the mother-in-law of Qi.  Yu is the sole director and control person of

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Cloud Asia Business Consulting, a Hong Kong company.  Yu did not have right of permanent
residence in Hong Kong.  According to bank records, Yu is unemployed and retired.
15. Cloud Asia Business Consulting Limited (“Cloud Asia”) is a Hong Kong
company organized on December 31, 2015 by Yu and officially established on January 8, 2016. In
Cloud Asia’s 2022 annual report to the Hong Kong government, it reported that Yu was its sole
director and shareholder and described her as a “Merchant” with an address in China.  There is no
known operations or physical address of Cloud Asia in Hong Kong.
FACTS

I. Gridsum’s Public Filings Contained Material Misstatements and Omissions Concerning
the Use of IPO Proceeds

A. Gridsum’s IPO Prospectus

16. Gridsum completed its IPO of ADSs on September 23, 2016.  Qi signed the amended
Registration Statement on Form F-1, and Gridsum filed it with the Commission on September 21,
2016.  The amended Form F-1 included a preliminary prospectus.  On September 22, 2016,
Gridsum’s IPO was declared effective, and on September 23, 2016, Gridsum issued a final
prospectus.
17. Shortly after, Gridsum’s underwriter wired approximately $92 million of IPO
proceeds to Gridsum’s US bank accounts in two installments.
18. Gridsum’s prospectus, filed on Form F-1, stated, “We intend to use the net proceeds
of this offering for working capital and other general corporate purposes, including investments in
technology and infrastructure, product development and expansion of sales and marketing efforts.”
19. The prospectus did not disclose that the Defendants would transfer IPO proceeds to
the personal bank accounts of company insiders, including officers and directors, or their immediate
family members.

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20. On September 28, 2016, Gridsum received the first installment of IPO proceeds of
approximately $80 million.
21. Just one day later, on September 29, 2016, Gridsum wired $300,000 of IPO proceeds
to the CEO’s wife, Ms. He, ostensibly as money owed to her mother’s company, Cloud Asia, for
purported consulting services.  It was the first of many transfers of IPO proceeds to officers,
directors, and their family members.
22. Gridsum’s CEO, Qi, was one of two authorized signatories on these accounts.
23. Gridsum failed to disclose these transfers of IPO proceeds to corporate insiders in its
IPO prospectus, and as described below, made similar materially false statements about its “Use of
IPO Proceeds” in its 2016, 2017, and 2018 annual reports filed on Forms 20-F.
B. Gridsum’s 2016 Form 20-F

24. On April 27, 2017, Qi signed and Gridsum filed with the Commission Gridsum’s
original annual report on Form 20-F for its fiscal year ended December 31, 2016.
25. In that 2016 Annual Report Gridsum and Qi claimed that from the IPO through April
27, 2017, Gridsum used IPO proceeds as follows:
We have used US$13.8 million net proceeds from our initial public
offering  for  general  corporate  purposes  which  include  working
capital management, improvement of corporate facilities, sales and
marketing activities and other general and administrative matters.

None  of  the  net  proceeds  from  our  initial  public  offering  were
directly or  indirectly  paid  to  the  directors,  officers,  general
partners  of  our  company  or  their  associates,  persons  owning
10% or more of our Class A or Class B ordinary shares, or our
affiliates. [emphasis added]

26. In reality, from September 23, 2016 through April 27, 2017, Gridsum, through the
U.S. bank accounts Qi controlled, paid more than $1.5 million of IPO proceeds to its officers,
directors, and their family members, including approximately $1 million to Qi’s wife, Ms. He.

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C. Gridsum’s 2017 Form 20-F

27. On January 7, 2019, Qi signed and Gridsum filed with the Commission Gridsum’s
annual report on Form 20-F for its fiscal year ended December 31, 2017.  This 2017 annual report
also included restated consolidated financial statements for Gridsum’s 2015 and 2016 fiscal years.
28. In that 2017 annual report Gridsum and Qi claimed that from the IPO through
December 31, 2017, Gridsum used IPO proceeds as follows:
We  have  used  approximately  US$65.6  million  net  proceeds  from
our  initial  public  offering  for  general  corporate  purposes  which
include working capital, improvement of corporate facilities, sales
and marketing activities, business acquisition and other general and
administrative matters.  None of the net proceeds from our initial
public offering were directly or indirectly paid to the directors,
officers,  general  partners  of  our  company  or  their  associates,
persons owning 10% or more of our Class A or Class B ordinary
shares, or our affiliates.  [emphasis added]

29. The 2017 annual report thus repeated the same false and misleading statement that
none of the net proceeds of the IPO were paid directly or indirectly to directors, officers, or their
associates.
30. From September 23, 2016 through December 31, 2017, Gridsum, through the U.S.
bank account Qi controlled, paid more than $3.1 million of IPO proceeds to its officers, directors,
and their family members, including more than $2 million to the Qi’s wife, Ms. He.
D. Gridsum’s 2018 Form 20-F

31. On April 24, 2019, Qi signed and Gridsum filed with the Commission Gridsum’s
annual report on Form 20-F for its fiscal year ended December 31, 2018.
32. Gridsum’s 2018 Annual Report, Gridsum and Qi claimed from the IPO through
December 31, 2018, Gridsum used IPO proceeds as follows:
We have used all of the net proceeds from our initial public offering
for  general  corporate  purposes  which  include  working  capital,
improvement of corporate facilities, sales and marketing activities,
business  acquisition  and  other  general  and  administrative  matters.

None  of  the  net  proceeds  from  our  initial  public  offering  were

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directly  or  indirectly  paid  to  the  directors,  officers,  general
partners  of  our  company  or  their  associates,  persons  owning
10% or more of our Class A or Class B ordinary shares, or our
affiliates.  [emphasis added]

33. The 2018 Annual Report thus repeated the false and misleading statement that none
of the net proceeds of the IPO were paid directly or indirectly to directors, officers, or their
associates.
34. From September 23, 2016 through December 31, 2018, Gridsum, through the U.S.
bank account Qi controlled, paid more than $3.8 million of IPO proceeds to its officers, directors,
and their family members, including more than $2.5 million to Qi’s wife, Ms. He.
E. Summary
35. In the approximately two-year period from the IPO effective date to the close of
Gridsum’s 2018 fiscal year, bank accounts that Qi controlled transferred IPO proceeds to his wife,
Ms. He, on approximately 35 occasions, totaling more than $2.5 million.  Even after April 27, 2017,
when Qi signed Gridsum’s 2016 annual report—which stated that no IPO proceeds were used to
pay officers, directors, or their associates—the U.S. bank accounts Qi controlled transferred IPO
proceeds to other Gridsum officers and directors on approximately 30 additional occasions.
36. Each of those Forms 20-F filed by Gridsum and signed by Qi were materially false
and misleading.  Qi and Gridsum knew or were reckless in not knowing that these representations
were false when they were made.  Moreover, these false and misleading statements were material.
At least $3,885,642 of Gridsum’s IPO proceeds were paid to officers, directors, or their family
members, as follows:

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Table 1

Payee Cumulative Total
as of April 27,
2017
Cumulative Total
as of December 31,
2017
Cumulative Total
as of December 31,
2018
He, Huijie ($987,612) ($2,006,418) ($2,541,481)
Other Officers and
Directors
($513,677) ($1,138,860) ($1,344,161)
Total ($1,501,289) ($3,145,278) ($3,885,642)

IPO Proceeds Used to
Date
$13.8mm $65.6mm $92mm
% of IPO Proceeds Paid
to Officers, Directors, or
Affiliates
10.88% 4.79% 4.22%

II. Qi and Gridsum Failed to Disclose Related-Party Transactions in Its Annual Reports Filed
with the SEC.

37. In addition to the above materially false and misleading statements concerning the
use of IPO proceeds, Qi and Gridsum entered into – but failed to disclose in annual reports as
required – certain related party transactions.
38. A related party transaction is a transaction between two parties who have a close
association, such as family members and affiliates, have common ownership, or can significantly
influence one another’s management or operating policies, as distinguished from a transaction
between third parties.
39. Specifically, in each of the annual reports on Form 20-F that Gridsum filed during
the Relevant Period, Qi and Gridsum failed to disclose related party transactions with Qi’s wife,
mother-in-law, and a shell company owned by Qi’s mother-in-law.
40. Qi and Gridsum failed to properly identify the following related party transactions
with Cloud Asia, Yu, and Ms. He on its Forms 20-F for the periods ended December 31, 2016

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through 2019, filed on April 27, 2017, January 7, 2019, April 24, 2019, and June 2, 2020,
respectively:
Table 2

Related Party
Transactions
2016 2017 2018 2019 Total
Cloud Asia contracts ($800,000) ($600,000) ($500,000)   ($1,900,000)
Payments to He, Huijie ($1,307,000) ($1,150,269) ($1,061,700) ($1,076,000) ($4,594,969)
Business Development
Loans
($1,200,000) ($1,150,269) ($448,500) ($155,000) ($2,953,769)
  Rent ($107,000)

($313,200) ($226,000) ($646,200)
  Wine

($300,000) ($695,000) ($995,000)
Payments to Yu, Yaping     ($650,000)   ($650,000)
 Total  ($2,107,000) ($1,750,269) ($2,211,700) ($1,076,000) ($7,144,969)

41. Each transaction above is a related-party transaction, and the total amount of all
related party transactions is $7,144,969.
42. The total cash value of the transactions was $5,244,969 because although Gridsum
entered into a contractual relationship with Cloud Asia worth $1.9 million, there is no evidence that
Cloud Asia was ever actually paid $1.9 million.
43. As a foreign private issuer, in accordance with Regulation S-K, Gridsum was
required to file annual reports including audited financial statements on Form 20-F.
A. Reporting Related Party Transactions

44. Gridsum elected to file its financial statements prepared in accordance with US
GAAP.
45. Item 404 of Regulation S-K, Item 7.B of Form 20-F, and US GAAP required
Gridsum to disclose certain related party transactions.

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46. Item 404 of Regulation S-K states that a “foreign private issuer will be deemed to
comply with this Item if it provides the information required by Item 7.B of Form 20-F . . . .”
47. Item 7.B required Gridsum to disclose: (1) the nature and extent of any transactions .
. . which are material to the company or the related party, or any transactions that are unusual in
their nature or conditions . . . to which the company or any of its parent or subsidiaries was a
party[;] (2) The amount of outstanding loans (including guarantees of any kind) made by the
company, its parent or any of its subsidiaries to or for the benefit of any of the persons listed
[below].
48. Item 7.B defines related parties to include “(d) key management personnel . . .
including directors and senior management . . . and close members of such individuals’ families;
and (e) enterprises . . . owned, directly or indirectly, by [close members of senior managements’
families] . . . .”
49. Item 7.B also states that “[c]lose members of an individual’s family are those that
may be expected to influence, or be influenced by, that person in their dealings with the company.”
50. Moreover, the instructions to Item 404(a) define related persons to include any
immediate family member of a director or executive officer of a registrant, including “mother-in-
law.”
51. Gridsum elected to prepare its financial statements in accordance with US GAAP.
On the first page of each of its annual reports on Form 20-F for its fiscal years ending 2016, 2017,
2018, and 2019, Gridsum noted its decision to prepare the financial statements filed with the annual
reports on the basis of US GAAP.  The Financial Accounting Standards Board Accounting
Standards Codification (“ASC”) is the single source of US GAAP for private issuers, like Gridsum.
See https://asc.fasb.org/Home.  ASC Topic 850, Related Party Disclosures (“ASC 850”) also
requires disclosure of related party transactions in the financial statements.

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52. ASC 850 provides that related party transactions include, among other things,
transactions between an entity and its principal owners, members of their immediate families, or
affiliates, or “other parties . . . if one party . . . can significantly influence the management or
operating policies of the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests.”
53. In addition, immediate family is defined as “Family members who might control or
influence a principal owner or a member of management, or who might be controlled or influenced
by a principal owner or a member of management, because of the family relationship.”
54. ASC 850 defines Affiliate as “party that, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with an entity.”
55. ASC 850 also provides that the disclosures should include the (1) nature of the
relationships, (2) descriptions of the transactions, (3) dollar amounts of the transactions; and (4)
amounts due from or to related parties as of the date of each balance sheet presented and, if not
otherwise apparent, the terms and manner of settlement.
56. Ms. He (Qi’s wife) and Yu (Qi’s mother-in-law) are related parties under Item 7.B
and ASC 850, respectively, because they are “close member[s] of [the CEO’s] famil[y]” and
immediate family members of Qi.
57. Cloud Asia is also a related party under Item 7.B because it is an “enterprise” owned
by Yu, a “close member” of Qi’s family.
58. Cloud Asia is also a related party under ASC 850 as Yu’s alter ego (and therefore an
immediate family member) and Gridsum’s affiliate.

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59. Moreover, Cloud Asia is a related party under ASC 850 because Gridsum and Qi
“significantly influence[d] [Cloud Asia] to an extent that [Cloud Asia was] prevented from fully
pursuing its own separate interests.”  As described more below, despite entering into a contractual
relationship with Gridsum worth $1.9 million, Cloud Asia was never actually paid.
B. Contractual Arrangements with Cloud Asia

60. As Table 2 reflects, from September 1, 2015 to at least September 30, 2018, Gridsum
entered into four “consulting service contracts” with Cloud Asia, a company owned by Yu – Ms.
He’s mother and Qi’s mother-in-law.
61. All four contracts were signed by Gridsum’s COO.
62. The contracts totaled $1.9 million, and Cloud Asia purportedly was to provide search
engine optimization and social media optimization services for an unspecified Gridsum website, as
well as to provide training to certain Gridsum employees.
63. The contracts contain several suspicious inconsistencies: The first contract was
signed in September 2015, before Cloud Asia had even been organized as a company.  The terms of
two of the contracts are overlapping.  The monthly compensation is inconsistent.   The website to be
optimized by Cloud Asia is not specified.  Cloud Asia’s address does not indicate the floor or suite
number in the 26-story office building in Hong Kong.  Each of the four contracts calls for
performing the same services to be provided year after year instead of indicating the completion of
work and then the undertaking of new work.
64. Gridsum’s US bank accounts did not pay money directly to Cloud Asia.
65. Instead, Gridsum paid Ms. He and Yu directly in connection with the Cloud Asia
contracts.
66. Cloud Asia failed to respond to requests for documents identifying the services it
provided Gridsum.

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67. Yu stated in her individual bank account opening documentation as of July 2018 that
she was unemployed and retired.  The fourth Cloud Asia consulting contract ran from October 2017
through September 2018, so Ms. Yu would have been retired and unemployed during at least 13
months of the contract term.
C. Payments to Ms. He

68. In total, through the U.S. Bank accounts Qi controlled, Ms. He received
approximately $3 million in “Employee Loans” and “Advances” for “Business Development” that
went undisclosed.
69. Based on documents available to Plaintiff, Ms. He did not repay her loan balance
during the Relevant P eriod.
70. Instead it appears that the only reduction in Ms. He’s outstanding loan balance “for
business development” came when Gridsum offset at least $706,769 of the balance by reducing the
same amount due to Cloud Asia.  Invoices concerning two of the four Cloud Asia consulting
contracts stated that Cloud Asia received its $500,000 service fee for each contract from Ms. He.
71. It appears that Ms. He did not pay Cloud Asia for its purported services to Gridsum
even though Ms. He received the money from Gridsum.
72. Ms. He also received approximately $1 million in undisclosed payments for the
purchase of fine wine, purportedly for business development, and approximately $650,000 in
payments for rent for an unspecified location.
73. These undisclosed payments were in addition to Ms. He’s compensation for serving
as Gridsum’s Vice President for Business Development.
D. Payments to Yu

74. From July through October 2018, Gridsum’s US bank accounts controlled by Qi,
made a series of payments totaling $650,000 to Yu’s personal bank accounts in Hong Kong, one of
which was opened days before the second payment was made.

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75. The bank memo lines for these payments read: “consulting service fee” or “service
fee.”  One of the payments had nothing in the bank memo line.
76. Yu stated in her account opening documentation that she was unemployed and
retired.
77. .  Gridsum’s July to October 2018 payments to Yu provided her with US dollars on
hand in Hong Kong facilitating Yu’s then-pending purchase of a condominium property there from
Ms. He.  Having cash on hand in Hong Kong is advantageous given China’s currency control
regime.
78. At times during the Relevant Period, Ms. He and her mother, Yu, both used the same
Hong Kong address as a residence.
79. On November 3, 2017, Ms. He executed an agreement to sell that residence to Yu for
6,300,000 HK$ (or approximately USD $800,000).  The completion date for the sale was postponed
from March 2018 to October 18, 2018.
80. Ms. He then completed the purchase of two new adjacent residences in Hong Kong,
and Qi guaranteed one of the mortgage loans.
E. Qi Knowingly Failed to Comply with Gridsum’s Policies

81. Gridsum’s Code of Business Conduct and Ethics expressly prohibited, among other
things, company loans to executive officers or their family members and other transactions that
represented actual or apparent conflicts of interest.
82. Qi, as CEO and Chairman of the Board, knew, or was reckless in not knowing, that
Gridsum, through bank accounts Qi controlled, provided loans to his wife and engaged in
undisclosed related party transactions with his wife, mother-in-law, and his mother-in-law’s
company.
83. Despite this, Qi certified that he “received, read, underst[ood]. . . [and has] fully
complied with . . . [Gridsum’s] Code of Business Conduct and Ethics.

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F. Qi Conceals Yu and Cloud Asia

84. In connection with the 2016 IPO, Qi signed management representation letters
provided to Gridsum’s auditors stating that all material related party transactions had been properly
recorded and disclosed in the financial statements.
85. In addition, on May 25, 2015 also as part of the pre-IPO diligence, Qi completed an
IPO Officer and Director Questionnaire (“2015 Questionnaire”).   On a Related Parties Table in the
Questionnaire that called for a list of family members, explicitly including “mothers- and fathers-in-
law,” Qi listed his wife, Ms. He, and his own parents, but not his mother-in-law, Yu, or Cloud Asia.
86. For 2015 through 2017, each annual Gridsum Related Parties List reports those same
individuals as Qi’s only family members (Ms. He and his parents).
87. Each annual related party list reports that it was prepared based on the signed
questionnaires of the relevant parties.
88. On April 11, 2017, Qi signed a Gridsum Officer and Director Questionnaire (“2017
Questionnaire”).  In response to the question:
“I am not aware of a transaction or any currently proposed transaction, in
which the Company was or is a participant and in which any RELATED
PERSON, had or will have a direct or indirect material interest and the
amount involved exceeds $120,000.”

Qi responded: “False” explaining that his wife received a salary as a Gridsum employee and listed
the amount. Qi, however, failed to disclose the other payments to his wife and mother-in-law or the
transactions with Cloud Asia, that are the subject of this action.
89. On March 3, 2020, the SEC requested information concerning Yu’s relationship with
Gridsum.  The company represented that it was unfamiliar with that name.  Gridsum never provided
the information concerning Yu.

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III. Gridsum’s Material Weaknesses

90. Qi executed certifications filed with Gridsum’s 2016, 2017, and 2018 annual reports.
In these disclosures he acknowledged his responsibility for, “establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the company.”  Qi also certified that he and Gridsum’s other certifying officer have: “Designed
such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.”
91. Gridsum disclosed the following two material weaknesses in each of its Form 20-F
filings for the 2016, 2017, and 2018 fiscal years:
a. The lack of sufficient financial reporting and accounting personnel with
appropriate knowledge of US GAAP and the SEC reporting requirements to
properly address complex accounting issues and to prepare and review its
financial statements and related disclosures in accordance with US GAAP
and SEC financial reporting requirements; and
b. The lack of sufficient written policies and procedures for approval of
contracts signed with newly engaged vendors for certain services.
92. Beginning in its 2017 20-F, Gridsum stated that, “as required by Section 404 . . . our
management including our chief executive officer and co-chief financial officers assessed the
effectiveness of internal control over financial reporting as of December 31, 2017 . . . [and]
concluded that our internal control over financial reporting was not effective.”

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IV.  Qi’s False Certifications

93. Qi signed Gridsum’s Forms 20-F during the Relevant Period.  In each filing, Qi
signed a certification, pursuant to Exchange Act Rule 13a–14, stating the following:
1. I  have  reviewed  this  annual  report  on  Form  20-F  of  Gridsum
Holding Inc.;

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in  light  of  the  circumstances  under
which  such  statements  were  made,  not  misleading  with  respect  to
the period covered by this report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other
financial  information  included  in  this  report,  fairly  present  in  all
material  respects  the  financial  condition,  results  of  operations  and
cash flows of the company as of, and for, the periods presented in
this report;

94. Qi’s certifications to these annual reports were false and misleading because he knew
or was reckless in not knowing that Gridsum’s 2016, 2017 and 2018 annual reports did not disclose
related party transactions, including the transactions with his wife and mother-in-law and Cloud
Asia.
95. Qi’s certifications to these annual reports were also false and misleading because he
knew or was reckless in not knowing that Gridsum made payments to officers, directors, their
family members and affiliates, including Qi’s wife, mother-in-law, and Cloud Asia.
FIRST CLAIM FOR RELIEF
Violations of Section 17(a)(1)-(3) of the Securities Act
(Against Gridsum and Qi)

96. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 95.
97. Defendants, by engaging in the conduct above, singly or in concert with others, in
the offer or sale of securities, by the use of means or instruments of transportation or
communication in interstate commerce or by use of the mails, directly or indirectly:

19

a. Knowingly or recklessly employed a device, scheme, or artifice to defraud;
b. Knowingly, recklessly, or negligently obtained money and property by means of
untrue statements of material facts and omissions to state material facts necessary in
order to make the statements made, in light of the circumstances under which they
were made, not misleading; or
c. Knowingly, recklessly, or negligently engaged in a transaction, practice, or course
of business which operated or would operate as a fraud or deceit upon the purchaser.
98. By engaging in the conduct described above, Defendants violated, and unless
restrained and enjoined will continue to violate, Sections 17(a)(1)-(3) of the Exchange Act [15
U.S.C. § 77q(a)(1)-(3)].

SECOND CLAIM FOR RELIEF
Fraud in Connection with the Purchase or Sale of Securities
(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder)
(Against Gridsum and Qi)

99. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 95.
100. By reason of the conduct described above, Defendants, in connection with the
purchase or sale of securities, by the use of the means or instrumentalities of interstate commerce or
of the mails, or of any facility of any national securities exchange, directly or indirectly, knowingly
or recklessly:  (1) employed devices, schemes, or artifices to defraud and/or (2) made untrue
statements of material facts or omitted to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading; and/or
(3) engaged in acts, practices, or courses of business which operated or would operate as a fraud or
deceit upon any persons, including purchasers or sellers of the securities.
101. Defendants acted with scienter in that they knowingly or recklessly engaged in the
fraudulent conduct described above.

20

102. By reason of the actions alleged herein, Defendants violated and unless enjoined will
continue to violate Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17
C.F.R. § 240.10b-5].
THIRD CLAIM FOR RELIEF
Violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 Thereunder
(Against Defendant Gridsum)

103. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 95.
104. From September 26, 2016 through April 5, 2021, Gridsum, was an issuer of
securities registered pursuant to Section 12 of the Exchange Act that filed required reports with the
Commission under Section 13(a) of the Exchange Act and related rules and regulations that: (a)
contained untrue statements of material fact; (b) failed to include, in addition to the information
required to be stated in such report, such further material information as may be necessary in order
to make the required statements, in light of the circumstances under which they were made, not
misleading; or (c) failed to disclose any information required to be disclosed therein.
105. By reason of the actions alleged herein, Defendant Gridsum violated and, unless
restrained and enjoined, will continue violating Section 13(a) of the Exchange Act [15 U.S.C. §§
78m(a)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§ 240.12b-20 and 240.13a-1].
FOURTH CLAIM FOR RELIEF
Violations of Section 13(b)(2)(B) of the Exchange Act
(Against Defendant Gridsum)

106. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 95.
107. By engaging in the conduct described above, Gridsum failed to devise and maintain
a system of internal accounting controls sufficient to provide reasonable assurances that Gridsum’s
corporate transactions were executed in accordance with management's authorization and in a
manner to permit the preparation of financial statements in conformity with US GAAP; and

21

Gridsum’s access to assets is permitted only in accordance with management’s general or specific
authorization, in violation of Exchange Act Section 13(b)(2)(B) [15 U.S.C. § 78m(b)(2)(B)].
108. By reason of the foregoing, Gridsum violated Exchange Act Section 13(b)(2)(B) [15
U.S.C. § 78m(b)(2)(B)].
FIFTH CLAIM FOR RELIEF
Violations of Section 13(a)-14 of the Exchange Act Rules
(Against Defendant Qi)

109. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 95.
110. Defendant Qi, as the principal executive officer of an issuer with a class of securities
registered pursuant to Exchange Act Section 12 [15 U.S.C. § 781], certified to the best of his
knowledge that one or more of the issuer’s periodic reports filed with the Commission contained no
untrue statements of material fact or omissions of material fact when Qi knew or recklessly
disregarded that the report or reports contained untrue statements of material fact or omissions of
material fact.
111. By reason of the foregoing, Defendant Qi violated and, unless enjoined, will again
violate Rule 13a-14 [17 C.F.R. § 240.13a-14] promulgated under Exchange Act § 13(a) [15 U.S.C.
§ 78m(a)].
SIXTH CLAIM FOR RELIEF
Violations of Section 13b2-2 of the Exchange Act Rules
(Against Defendant Qi)

112. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 95.
113. From May 2015 through June 2020, Defendant Qi, directly or indirectly, made or
caused to be made materially false or misleading statements to an accountant in connection with
audits and reviews of Gridsum’s financial statements or in the preparation or filing of Gridsum’s
documents or reports required to be filed with the SEC; or omitted to state, or caused another person

22

to omit to state, material facts necessary in order to make statements made, in light of the
circumstances under which such statement were made, not misleading, to an accountant in
connection with audits and reviews of Gridsum’s financial statements or in the preparation or filing
of Gridsum’s documents or reports required to be filed with the SEC.
114. By reason of the foregoing, Defendant Qi violated and, unless enjoined, will again
violate Exchange Act Rule 13b2-2 [17 C.F.R. § 240.13b2-2] promulgated under Exchange Act §
13(b) [15 U.S.C. § 78m(b)].

SEVENTH CLAIM FOR RELIEF
Aiding and Abetting Violations of Section 13(a) of the Exchange Act and Exchange Act Rules
12b-20 and 13a-1 Thereunder
(Against Defendant Qi)

115. The Commission re-alleges and incorporates by reference here the allegations in
paragraphs 1 through 95.
116. By engaging in the conduct described above, Qi aided and abetted Gridsum’s
violations of Sections 13(a) [15 U.S.C. §§ 78m(a)] and Exchange Act Rules 12b-20 and 13a-1
thereunder [17 C.F.R. §§ 240.12b-20 and 240.13a-1], in that he, acting with the requisite state of
mind, provided substantial assistance to Gridsum in committing these violations.
117. By reason of the foregoing, Qi aided and abetted Gridsum’s violations of Sections
13(a) [15 U.S.C. §§ 78m(a)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§ 240.12b-20 and
240.13a-1], which obligates issuers of securities registered pursuant to Section 12 of the Exchange
Act [15 U.S.C. § 781] to file with the SEC periodic reports that are accurate and not misleading.
118. By engaging in the conduct described above, Qi knowingly or recklessly provided
substantial assistance to Gridsum’s filing of false and misleading annual reports with the SEC.
119. By reason of the foregoing, Qi aided and abetted, and unless enjoined, will continue
to aid and abet such violations.

23

EIGHTH CLAIM FOR RELIEF
Disgorgement of Unjust Enrichment
(Against Relief Defendant He Huijie)

120. The Commission realleges and reincorporates paragraphs 1 through 95 as if fully set
forth herein.
121. As described above, Defendants engaged in a scheme to defraud investors in
connection with the offer, purchase, or sale of securities of Gridsum and to use the money raised to
unjustly enrich themselves, and Relief Defendant Ms. He, and others.  Ms. He has no legitimate
claim to the funds, property and benefits described above, and has thus been unjustly enriched under
circumstances in which it is not just, equitable, or conscionable for it to retain such profits.
122. By reason of the foregoing, it would be inequitable for Relief Defendant Ms. He to
retain the proceeds resulting from Defendants’ violations of the federal securities laws and such
proceeds should be disgorged.
PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that the Court enter a Final Judgment:
I.
Finding that the Defendants violated the provisions of the federal securities laws as alleged
herein.
II
.
Permanently restraining and enjoining Defendants and their agents, servants, employees and
attorneys and all persons in active concert or participation with any of them from violating, directly
or indirectly, Sections 17(a)(1)-(3) of the Securities Act [15 U.S.C. § 77q(a)(1)-(3)], Sections 10(b)
and 13(a) of the Exchange Act [15 U.S.C. § 78j(b) and 15 U.S.C. §§ 78m(a)] and Rules 10b-5, 12b-
20 and 13a-1 thereunder [17 C.F.R. §§ 240.10b-5240.12b-20, and 240.13a-1].

24

III.
Permanently restraining and enjoining Defendant Gridsum and its agents, servants,
employees and attorneys and all persons in active concert or participation with any of them from
violating, directly or indirectly, Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. §
78m(b)(2)(B)].

IV.
Permanently restraining and enjoining Defendant Qi and his agents, servants, employees and
attorneys and all persons in active concert or participation with any of them from violating, directly
or indirectly, Rule 13a-14 [17 C.F.R. § 240.13a-14] and Rule 13b2-2 [17 C.F.R. § 240.13b2-2].

V.
Ordering each Defendant and the Relief Defendant to disgorge all their ill-gotten gains, plus
prejudgment interest thereon, pursuant to Sections 21(d)(3), (5) and (7) of the Exchange Act [15
U.S.C. §§ 78u(d)(3), (5) and (7)].

VI.
Ordering Defendants to pay civil monetary penalties in an amount determined by the Court
pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the
Exchange Act [15 U.S.C. § 78u(d)(3)].

VII.

Permanently prohibiting Qi from serving as an officer or director of any company that has a
class of securities registered under Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is
required to file reports under Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)], pursuant to

25

Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act
[15 U.S.C. § 78u(d)(2)].
VIII.
Granting any other and further relief as the Court may deem just and proper.

JURY DEMAND
The Commission demands a trial by jury on all issues so triable.

Dated:  September 7, 2023    Respectfully submitted,

/s/  Derek Bentsen

      Derek Bentsen
Kristen M. Warden*
Michael T. Grimes*
Adam Eisner*
Attorneys for Plaintiff
U.S. SECURITIES AND EXCHANGE
COMMISSION
100 F Street, N.E.
Washington, DC 20594
Phone: (202) 551-6426 (Bentsen)
[email protected]
Phone: (202) 551-4661 (Warden)
[email protected]
Phone: (202) 551-4861 (Grimes)
[email protected]
Phone: (202) 551-4871 (Eisner)
[email protected]

* Pending admission pro hac vice

Of Counsel:
Charles J. Felker
100 F Street NE
Washington, DC

1  
 

 
 
UNITED STATES DISTRICT COURT 
SOUTHERN DISRICT OF NEW YORK 

 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 
 

vs. 

GUOSHENG QI and GRIDSUM HOLDING 
INC., 
 
 
                       Defendants, and 
 
HUIJIE HE, 
 
                       Relief Defendant. 
 
 

 Case No.  1:23-cv-7924 
 
 
 
JURY TRIAL DEMANDED  

 
COMPLAINT 

 
Plaintiff Securities and Exchange Commission (the “Commission” or “SEC”), alleges as 

follows for the period from September 2016 to June 2020 (the “Relevant Period”), concerning 

Gridsum Holding Inc. (“Gridsum”), a publicly traded company whose shares traded on the Nasdaq 

Global Select Market (“Nasdaq”), and Guosheng Qi (“Qi”) Gridsum’s CEO (collectively, 

“Defendants”): 

SUMMARY 
 

1. This case involves Defendants’ misuse and unreported use of funds raised in a 2016 

initial public offering (IPO) as well as Defendants’ failure to disclose millions of dollars in related-

party transactions that benefitted Defendant Qi’s family members.   

2.  Within days of Gridsum’s IPO and continuing for three years, Gridsum, and Qi 

directed a series of undisclosed payments to Qi’s wife and mother-in-law for supposed consulting 

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contracts between Gridsum and a company controlled by Qi’s mother-in-law.  The total value of 

these related party transactions equaled $7.1 million, and Qi and his family directly or indirectly 

received at least $5.2 million.         

3. Gridsum and Qi also falsely stated in Gridsum’s 2016, 2017, and 2018 annual reports 

that no IPO proceeds were used to pay officers, directors, or their associates.  In fact, Gridsum’s 

officers, directors, and associates received approximately $3.8 million of IPO proceeds that were 

paid from U.S. bank accounts that Qi controlled.  Qi’s wife received approximately $2.5 million of 

these IPO proceeds.   

4. As a result of the conduct alleged herein, Defendants Qi and Gridsum have 

committed securities fraud and other securities violations.  Defendant Qi also aided and abetted 

some of Gridsum’s violations.  The violations alleged in this Complaint were part of a scheme 

among the defendants to use IPO proceeds and other Gridsum funds to enrich Qi.  

5. Qi and Gridsum violated, and unless restrained and enjoined may continue to violate, 

Sections 17(a)(1)-(3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)(1)-(3)], 

Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. § 78j(b)] 

and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].   

6. Gridsum violated, and unless restrained and enjoined may continue to violate, 

Sections 13(a) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(a) and 78m(b)(2)(B)] and 

Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§240.12b-20 and 240.13a-1].  

7. Qi also violated Exchange Act Rules 13a-14 and 13b2-2 [17 C.F.R. §§240.13a-14 

and 240.13b2-2], and aided and abetted Gridsum’s violations of Section 13(a) of the Exchange Act 

[15 U.S.C. § 78m(a)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§240.12b-20 and 

240.13a-1]. 

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JURISDICTION AND VENUE 

8. This Court has subject matter jurisdiction over this action pursuant to Sections 20 

and 22 of the Securities Act [15 U.S.C. §§ 77t and 77v], Sections 21 and 27 of the Exchange Act 

[15 U.S.C. § 78u and 78aa], and 28 U.S.C. § 1331. 

9. In connection with the conduct alleged in this Complaint, Defendants, directly and 

indirectly, singly or in concert with others, have made use of the means or instrumentalities of 

interstate commerce or the mails in connection with the acts, practices, and courses of business 

alleged herein. 

10. Venue lies in this District under Section 22(a) of the Securities Act [15 U.S.C.          

§ 77v(a)] and Section 27(a) of the Exchange Act [15 U.S.C. § 78aa(a)] because, among other things, 

some of the acts, practices, transactions, and courses of business alleged in this Complaint occurred 

within the Southern District of New York and were effected, directly or indirectly, by making use of 

means or instrumentalities of transportation or communication in interstate commerce, or the mails, 

or the facilities of a national securities exchange.  For example, during the Relevant Period, the 

Company’s stock was publicly traded on Nasdaq, located in the Southern District of New York.  In 

addition, several individuals residing in the Southern District of New York purchased and sold 

Gridsum stock during the Relevant Period.  The false and misleading statements identified in this 

Complaint were directed to investors located in the Southern District of New York. 

DEFENDANTS 

11. Qi, age 39, served at all relevant times as Gridsum’s Chief Executive Officer (CEO), 

Chairman of its Board, and as one of Gridsum’s founders.  Qi founded Beijing Gridsum in 2005 

when he was a student at Tsinghua University.  Qi holds a bachelor’s degree in computer science 

from Tsinghua University.  Qi is a resident of Beijing, China and Hong Kong. 

12. Gridsum, is a cloud-based analytics company that commenced operations in 

December 2005 in China with the establishment of Beijing Gridsum Technology Co., Ltd.  Gridsum 

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later established five additional operating companies in China and incorporated Gridsum Holding 

Inc., under the laws of the Cayman Islands on July 21, 2014, as the parent holding company and the 

vehicle for listing in the U.S.  Gridsum conducts operations in China principally through a complex 

variable interest entity (“VIE”) structure with Gridsum Holding (Beijing) Co., Ltd. (“Gridsum 

Beijing”) as its parent and its subsidiaries.  Gridsum’s founder, CEO, and Chairman (Guosheng Qi) 

is the majority owner of Gridsum Beijing.  Gridsum consolidated the financial statements of 

Gridsum Beijing and its subsidiaries as a VIE under U.S. Generally Accepted Accounting Principles 

(“ US GAAP”).  From September 23, 2016, when it completed its IPO, until April 5, 2021, when it 

went private, Gridsum was a foreign private issuer and an emerging growth company who had a 

class of securities registered with the Commission under Section 12(b) of the Exchange Act.  

During that period, Gridsum filed annual reports with the Commission on Form 20-F, electing to 

prepare its financial statements in accordance with US GAAP.  Gridsum’s American Depository 

Shares (“ADS”) were listed on Nasdaq under the trading symbol “GSUM.”  On April 5, 2021, 

Gridsum went private pursuant to Rule 13e-3 under the Exchange Act through a merger agreement 

and filed a Schedule 13E-3.  Gridsum, the surviving entity of the merger, bought back its ADSs for 

$2 per share, and withdrew its registration with the Commission.   

RELIEF DEFENDANT 

13. Huijie He (“Ms. He”), age 41, is a resident of Beijing, China and Hong Kong. Ms. 

He is the wife of Gridsum’s CEO, Qi, and purportedly serves as Gridsum’s Vice President of 

Business Development.  Ms. He also uses the name “Scarlett.” 

OTHER RELATED ENTITIES AND PERSONS 

14. Yaping Yu (“Yu”), age 65, resides in Lanzhou City, Gansu Province, China.  Yu is 

the mother of Ms. He and the mother-in-law of Qi.  Yu is the sole director and control person of 

Case 1:23-cv-07924   Document 1   Filed 09/07/23   Page 4 of 25



 5  
 

Cloud Asia Business Consulting, a Hong Kong company.  Yu did not have right of permanent 

residence in Hong Kong.  According to bank records, Yu is unemployed and retired.  

15. Cloud Asia Business Consulting Limited (“Cloud Asia”) is a Hong Kong 

company organized on December 31, 2015 by Yu and officially established on January 8, 2016. In 

Cloud Asia’s 2022 annual report to the Hong Kong government, it reported that Yu was its sole 

director and shareholder and described her as a “Merchant” with an address in China.  There is no 

known operations or physical address of Cloud Asia in Hong Kong.   

FACTS 

I. Gridsum’s Public Filings Contained Material Misstatements and Omissions Concerning 
the Use of IPO Proceeds   
 
A. Gridsum’s IPO Prospectus  

 
16. Gridsum completed its IPO of ADSs on September 23, 2016.  Qi signed the amended 

Registration Statement on Form F-1, and Gridsum filed it with the Commission on September 21, 

2016.  The amended Form F-1 included a preliminary prospectus.  On September 22, 2016, 

Gridsum’s IPO was declared effective, and on September 23, 2016, Gridsum issued a final 

prospectus.   

17. Shortly after, Gridsum’s underwriter wired approximately $92 million of IPO 

proceeds to Gridsum’s US bank accounts in two installments. 

18. Gridsum’s prospectus, filed on Form F-1, stated, “We intend to use the net proceeds 

of this offering for working capital and other general corporate purposes, including investments in 

technology and infrastructure, product development and expansion of sales and marketing efforts.”   

19. The prospectus did not disclose that the Defendants would transfer IPO proceeds to 

the personal bank accounts of company insiders, including officers and directors, or their immediate 

family members. 

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 6  
 

20. On September 28, 2016, Gridsum received the first installment of IPO proceeds of 

approximately $80 million.   

21. Just one day later, on September 29, 2016, Gridsum wired $300,000 of IPO proceeds 

to the CEO’s wife, Ms. He, ostensibly as money owed to her mother’s company, Cloud Asia, for 

purported consulting services.  It was the first of many transfers of IPO proceeds to officers, 

directors, and their family members.   

22. Gridsum’s CEO, Qi, was one of two authorized signatories on these accounts.  

23. Gridsum failed to disclose these transfers of IPO proceeds to corporate insiders in its 

IPO prospectus, and as described below, made similar materially false statements about its “Use of 

IPO Proceeds” in its 2016, 2017, and 2018 annual reports filed on Forms 20-F.   

B. Gridsum’s 2016 Form 20-F 
 
24. On April 27, 2017, Qi signed and Gridsum filed with the Commission Gridsum’s 

original annual report on Form 20-F for its fiscal year ended December 31, 2016.  

25. In that 2016 Annual Report Gridsum and Qi claimed that from the IPO through April 

27, 2017, Gridsum used IPO proceeds as follows:  

We have used US$13.8 million net proceeds from our initial public 
offering for general corporate purposes which include working 
capital management, improvement of corporate facilities, sales and 
marketing activities and other general and administrative matters. 

 
None of the net proceeds from our initial public offering were 
directly or indirectly paid to the directors, officers, general 
partners of our company or their associates, persons owning 
10% or more of our Class A or Class B ordinary shares, or our 
affiliates. [emphasis added] 

 
26. In reality, from September 23, 2016 through April 27, 2017, Gridsum, through the 

U.S. bank accounts Qi controlled, paid more than $1.5 million of IPO proceeds to its officers, 

directors, and their family members, including approximately $1 million to Qi’s wife, Ms. He. 

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C. Gridsum’s 2017 Form 20-F 
 
27. On January 7, 2019, Qi signed and Gridsum filed with the Commission Gridsum’s 

annual report on Form 20-F for its fiscal year ended December 31, 2017.  This 2017 annual report 

also included restated consolidated financial statements for Gridsum’s 2015 and 2016 fiscal years.  

28. In that 2017 annual report Gridsum and Qi claimed that from the IPO through 

December 31, 2017, Gridsum used IPO proceeds as follows:   

We have used approximately US$65.6 million net proceeds from 
our initial public offering for general corporate purposes which 
include working capital, improvement of corporate facilities, sales 
and marketing activities, business acquisition and other general and 
administrative matters.  None of the net proceeds from our initial 
public offering were directly or indirectly paid to the directors, 
officers, general partners of our company or their associates, 
persons owning 10% or more of our Class A or Class B ordinary 
shares, or our affiliates.  [emphasis added] 

 
29. The 2017 annual report thus repeated the same false and misleading statement that 

none of the net proceeds of the IPO were paid directly or indirectly to directors, officers, or their 

associates.   

30. From September 23, 2016 through December 31, 2017, Gridsum, through the U.S. 

bank account Qi controlled, paid more than $3.1 million of IPO proceeds to its officers, directors, 

and their family members, including more than $2 million to the Qi’s wife, Ms. He. 

D. Gridsum’s 2018 Form 20-F 
 
31. On April 24, 2019, Qi signed and Gridsum filed with the Commission Gridsum’s 

annual report on Form 20-F for its fiscal year ended December 31, 2018.   

32. Gridsum’s 2018 Annual Report, Gridsum and Qi claimed from the IPO through 

December 31, 2018, Gridsum used IPO proceeds as follows:   

We have used all of the net proceeds from our initial public offering 
for general corporate purposes which include working capital, 
improvement of corporate facilities, sales and marketing activities, 
business acquisition and other general and administrative matters. 
None of the net proceeds from our initial public offering were 

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 8  
 

directly or indirectly paid to the directors, officers, general 
partners of our company or their associates, persons owning 
10% or more of our Class A or Class B ordinary shares, or our 
affiliates.  [emphasis added] 

 
33. The 2018 Annual Report thus repeated the false and misleading statement that none 

of the net proceeds of the IPO were paid directly or indirectly to directors, officers, or their 

associates.   

34. From September 23, 2016 through December 31, 2018, Gridsum, through the U.S. 

bank account Qi controlled, paid more than $3.8 million of IPO proceeds to its officers, directors, 

and their family members, including more than $2.5 million to Qi’s wife, Ms. He. 

E. Summary 

35. In the approximately two-year period from the IPO effective date to the close of 

Gridsum’s 2018 fiscal year, bank accounts that Qi controlled transferred IPO proceeds to his wife, 

Ms. He, on approximately 35 occasions, totaling more than $2.5 million.  Even after April 27, 2017, 

when Qi signed Gridsum’s 2016 annual report—which stated that no IPO proceeds were used to 

pay officers, directors, or their associates—the U.S. bank accounts Qi controlled transferred IPO 

proceeds to other Gridsum officers and directors on approximately 30 additional occasions.   

36. Each of those Forms 20-F filed by Gridsum and signed by Qi were materially false 

and misleading.  Qi and Gridsum knew or were reckless in not knowing that these representations 

were false when they were made.  Moreover, these false and misleading statements were material.  

At least $3,885,642 of Gridsum’s IPO proceeds were paid to officers, directors, or their family 

members, as follows: 

 

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Table 1 
 

Payee Cumulative Total 
as of April 27, 

2017 

Cumulative Total 
as of December 31, 

2017 

Cumulative Total 
as of December 31, 

2018 

He, Huijie ($987,612) ($2,006,418) ($2,541,481) 

Other Officers and 
Directors 

($513,677) ($1,138,860) ($1,344,161) 

Total ($1,501,289) ($3,145,278) ($3,885,642) 

  
   

IPO Proceeds Used to 
Date 

$13.8mm $65.6mm $92mm 

% of IPO Proceeds Paid 
to Officers, Directors, or 
Affiliates 

10.88% 4.79% 4.22% 

 
 
II. Qi and Gridsum Failed to Disclose Related-Party Transactions in Its Annual Reports Filed 

with the SEC. 
 

37. In addition to the above materially false and misleading statements concerning the 

use of IPO proceeds, Qi and Gridsum entered into – but failed to disclose in annual reports as 

required – certain related party transactions. 

38. A related party transaction is a transaction between two parties who have a close 

association, such as family members and affiliates, have common ownership, or can significantly 

influence one another’s management or operating policies, as distinguished from a transaction 

between third parties.     

39. Specifically, in each of the annual reports on Form 20-F that Gridsum filed during 

the Relevant Period, Qi and Gridsum failed to disclose related party transactions with Qi’s wife, 

mother-in-law, and a shell company owned by Qi’s mother-in-law.   

40. Qi and Gridsum failed to properly identify the following related party transactions 

with Cloud Asia, Yu, and Ms. He on its Forms 20-F for the periods ended December 31, 2016 

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through 2019, filed on April 27, 2017, January 7, 2019, April 24, 2019, and June 2, 2020, 

respectively: 

Table 2 
 

Related Party 
Transactions  2016 2017 2018 2019 Total 

Cloud Asia contracts ($800,000) ($600,000) ($500,000)   ($1,900,000) 

Payments to He, Huijie ($1,307,000) ($1,150,269) ($1,061,700) ($1,076,000) ($4,594,969) 

Business Development 
Loans ($1,200,000) ($1,150,269) ($448,500) ($155,000) ($2,953,769) 

  Rent ($107,000)  ($313,200) ($226,000) ($646,200) 

  Wine   ($300,000) ($695,000) ($995,000) 

Payments to Yu, Yaping     ($650,000)   ($650,000) 

 Total  ($2,107,000) ($1,750,269) ($2,211,700) ($1,076,000) ($7,144,969) 

 
41. Each transaction above is a related-party transaction, and the total amount of all 

related party transactions is $7,144,969.   

42. The total cash value of the transactions was $5,244,969 because although Gridsum 

entered into a contractual relationship with Cloud Asia worth $1.9 million, there is no evidence that 

Cloud Asia was ever actually paid $1.9 million.  

43. As a foreign private issuer, in accordance with Regulation S-K, Gridsum was 

required to file annual reports including audited financial statements on Form 20-F. 

A. Reporting Related Party Transactions 
 
44. Gridsum elected to file its financial statements prepared in accordance with US 

GAAP.   

45. Item 404 of Regulation S-K, Item 7.B of Form 20-F, and US GAAP required 

Gridsum to disclose certain related party transactions.   

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46. Item 404 of Regulation S-K states that a “foreign private issuer will be deemed to 

comply with this Item if it provides the information required by Item 7.B of Form 20-F . . . .”  

47. Item 7.B required Gridsum to disclose: (1) the nature and extent of any transactions . 

. . which are material to the company or the related party, or any transactions that are unusual in 

their nature or conditions . . . to which the company or any of its parent or subsidiaries was a 

party[;] (2) The amount of outstanding loans (including guarantees of any kind) made by the 

company, its parent or any of its subsidiaries to or for the benefit of any of the persons listed 

[below]. 

48. Item 7.B defines related parties to include “(d) key management personnel . . . 

including directors and senior management . . . and close members of such individuals’ families; 

and (e) enterprises . . . owned, directly or indirectly, by [close members of senior managements’ 

families] . . . .”   

49. Item 7.B also states that “[c]lose members of an individual’s family are those that 

may be expected to influence, or be influenced by, that person in their dealings with the company.”   

50. Moreover, the instructions to Item 404(a) define related persons to include any 

immediate family member of a director or executive officer of a registrant, including “mother-in-

law.” 

51. Gridsum elected to prepare its financial statements in accordance with US GAAP.  

On the first page of each of its annual reports on Form 20-F for its fiscal years ending 2016, 2017, 

2018, and 2019, Gridsum noted its decision to prepare the financial statements filed with the annual 

reports on the basis of US GAAP.  The Financial Accounting Standards Board Accounting 

Standards Codification (“ASC”) is the single source of US GAAP for private issuers, like Gridsum.  

See https://asc.fasb.org/Home.  ASC Topic 850, Related Party Disclosures (“ASC 850”) also 

requires disclosure of related party transactions in the financial statements.   

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52. ASC 850 provides that related party transactions include, among other things, 

transactions between an entity and its principal owners, members of their immediate families, or 

affiliates, or “other parties . . . if one party . . . can significantly influence the management or 

operating policies of the other to an extent that one of the transacting parties might be prevented 

from fully pursuing its own separate interests.”   

53. In addition, immediate family is defined as “Family members who might control or 

influence a principal owner or a member of management, or who might be controlled or influenced 

by a principal owner or a member of management, because of the family relationship.”   

54. ASC 850 defines Affiliate as “party that, directly or indirectly through one or more 

intermediaries, controls, is controlled by, or is under common control with an entity.”   

55. ASC 850 also provides that the disclosures should include the (1) nature of the 

relationships, (2) descriptions of the transactions, (3) dollar amounts of the transactions; and (4) 

amounts due from or to related parties as of the date of each balance sheet presented and, if not 

otherwise apparent, the terms and manner of settlement.   

56. Ms. He (Qi’s wife) and Yu (Qi’s mother-in-law) are related parties under Item 7.B 

and ASC 850, respectively, because they are “close member[s] of [the CEO’s] famil[y]” and 

immediate family members of Qi.   

57. Cloud Asia is also a related party under Item 7.B because it is an “enterprise” owned 

by Yu, a “close member” of Qi’s family.   

58. Cloud Asia is also a related party under ASC 850 as Yu’s alter ego (and therefore an 

immediate family member) and Gridsum’s affiliate.   

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59. Moreover, Cloud Asia is a related party under ASC 850 because Gridsum and Qi 

“significantly influence[d] [Cloud Asia] to an extent that [Cloud Asia was] prevented from fully 

pursuing its own separate interests.”  As described more below, despite entering into a contractual 

relationship with Gridsum worth $1.9 million, Cloud Asia was never actually paid. 

B. Contractual Arrangements with Cloud Asia 
 
60. As Table 2 reflects, from September 1, 2015 to at least September 30, 2018, Gridsum 

entered into four “consulting service contracts” with Cloud Asia, a company owned by Yu – Ms. 

He’s mother and Qi’s mother-in-law.   

61. All four contracts were signed by Gridsum’s COO.   

62. The contracts totaled $1.9 million, and Cloud Asia purportedly was to provide search 

engine optimization and social media optimization services for an unspecified Gridsum website, as 

well as to provide training to certain Gridsum employees.   

63. The contracts contain several suspicious inconsistencies: The first contract was 

signed in September 2015, before Cloud Asia had even been organized as a company.  The terms of 

two of the contracts are overlapping.  The monthly compensation is inconsistent.   The website to be 

optimized by Cloud Asia is not specified.  Cloud Asia’s address does not indicate the floor or suite 

number in the 26-story office building in Hong Kong.  Each of the four contracts calls for 

performing the same services to be provided year after year instead of indicating the completion of 

work and then the undertaking of new work. 

64. Gridsum’s US bank accounts did not pay money directly to Cloud Asia.  

65. Instead, Gridsum paid Ms. He and Yu directly in connection with the Cloud Asia 

contracts.   

66. Cloud Asia failed to respond to requests for documents identifying the services it 

provided Gridsum.   

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67. Yu stated in her individual bank account opening documentation as of July 2018 that 

she was unemployed and retired.  The fourth Cloud Asia consulting contract ran from October 2017 

through September 2018, so Ms. Yu would have been retired and unemployed during at least 13 

months of the contract term. 

C. Payments to Ms. He 
 
68. In total, through the U.S. Bank accounts Qi controlled, Ms. He received 

approximately $3 million in “Employee Loans” and “Advances” for “Business Development” that 

went undisclosed.  

69. Based on documents available to Plaintiff, Ms. He did not repay her loan balance 

during the Relevant Period.    

70. Instead it appears that the only reduction in Ms. He’s outstanding loan balance “for 

business development” came when Gridsum offset at least $706,769 of the balance by reducing the 

same amount due to Cloud Asia.  Invoices concerning two of the four Cloud Asia consulting 

contracts stated that Cloud Asia received its $500,000 service fee for each contract from Ms. He.    

71. It appears that Ms. He did not pay Cloud Asia for its purported services to Gridsum 

even though Ms. He received the money from Gridsum. 

72. Ms. He also received approximately $1 million in undisclosed payments for the 

purchase of fine wine, purportedly for business development, and approximately $650,000 in 

payments for rent for an unspecified location. 

73. These undisclosed payments were in addition to Ms. He’s compensation for serving 

as Gridsum’s Vice President for Business Development. 

D. Payments to Yu 
 
74. From July through October 2018, Gridsum’s US bank accounts controlled by Qi, 

made a series of payments totaling $650,000 to Yu’s personal bank accounts in Hong Kong, one of 

which was opened days before the second payment was made.   

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75. The bank memo lines for these payments read: “consulting service fee” or “service 

fee.”  One of the payments had nothing in the bank memo line.  

76. Yu stated in her account opening documentation that she was unemployed and 

retired.  

77. .  Gridsum’s July to October 2018 payments to Yu provided her with US dollars on 

hand in Hong Kong facilitating Yu’s then-pending purchase of a condominium property there from 

Ms. He.  Having cash on hand in Hong Kong is advantageous given China’s currency control 

regime. 

78. At times during the Relevant Period, Ms. He and her mother, Yu, both used the same 

Hong Kong address as a residence.   

79. On November 3, 2017, Ms. He executed an agreement to sell that residence to Yu for 

6,300,000 HK$ (or approximately USD $800,000).  The completion date for the sale was postponed 

from March 2018 to October 18, 2018. 

80. Ms. He then completed the purchase of two new adjacent residences in Hong Kong, 

and Qi guaranteed one of the mortgage loans. 

E. Qi Knowingly Failed to Comply with Gridsum’s Policies 
 
81. Gridsum’s Code of Business Conduct and Ethics expressly prohibited, among other 

things, company loans to executive officers or their family members and other transactions that 

represented actual or apparent conflicts of interest.  

82. Qi, as CEO and Chairman of the Board, knew, or was reckless in not knowing, that 

Gridsum, through bank accounts Qi controlled, provided loans to his wife and engaged in 

undisclosed related party transactions with his wife, mother-in-law, and his mother-in-law’s 

company. 

83. Despite this, Qi certified that he “received, read, underst[ood]. . . [and has] fully 

complied with . . . [Gridsum’s] Code of Business Conduct and Ethics. 

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F. Qi Conceals Yu and Cloud Asia 
 
84. In connection with the 2016 IPO, Qi signed management representation letters 

provided to Gridsum’s auditors stating that all material related party transactions had been properly 

recorded and disclosed in the financial statements.   

85. In addition, on May 25, 2015 also as part of the pre-IPO diligence, Qi completed an 

IPO Officer and Director Questionnaire (“2015 Questionnaire”).  On a Related Parties Table in the 

Questionnaire that called for a list of family members, explicitly including “mothers- and fathers-in-

law,” Qi listed his wife, Ms. He, and his own parents, but not his mother-in-law, Yu, or Cloud Asia.  

86. For 2015 through 2017, each annual Gridsum Related Parties List reports those same 

individuals as Qi’s only family members (Ms. He and his parents).   

87. Each annual related party list reports that it was prepared based on the signed 

questionnaires of the relevant parties.   

88. On April 11, 2017, Qi signed a Gridsum Officer and Director Questionnaire (“2017 

Questionnaire”).  In response to the question: 

“I am not aware of a transaction or any currently proposed transaction, in 
which the Company was or is a participant and in which any RELATED 
PERSON, had or will have a direct or indirect material interest and the 
amount involved exceeds $120,000.” 
 

Qi responded: “False” explaining that his wife received a salary as a Gridsum employee and listed 

the amount. Qi, however, failed to disclose the other payments to his wife and mother-in-law or the 

transactions with Cloud Asia, that are the subject of this action.      

89. On March 3, 2020, the SEC requested information concerning Yu’s relationship with 

Gridsum.  The company represented that it was unfamiliar with that name.  Gridsum never provided 

the information concerning Yu.   

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III. Gridsum’s Material Weaknesses 
 

90. Qi executed certifications filed with Gridsum’s 2016, 2017, and 2018 annual reports.  

In these disclosures he acknowledged his responsibility for, “establishing and maintaining 

disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and 

internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 

for the company.”  Qi also certified that he and Gridsum’s other certifying officer have: “Designed 

such internal control over financial reporting, or caused such internal control over financial 

reporting to be designed under our supervision, to provide reasonable assurance regarding the 

reliability of financial reporting and the preparation of financial statements for external purposes in 

accordance with generally accepted accounting principles.”  

91. Gridsum disclosed the following two material weaknesses in each of its Form 20-F 

filings for the 2016, 2017, and 2018 fiscal years: 

a. The lack of sufficient financial reporting and accounting personnel with 

appropriate knowledge of US GAAP and the SEC reporting requirements to 

properly address complex accounting issues and to prepare and review its 

financial statements and related disclosures in accordance with US GAAP 

and SEC financial reporting requirements; and  

b. The lack of sufficient written policies and procedures for approval of 

contracts signed with newly engaged vendors for certain services. 

92. Beginning in its 2017 20-F, Gridsum stated that, “as required by Section 404 . . . our 

management including our chief executive officer and co-chief financial officers assessed the 

effectiveness of internal control over financial reporting as of December 31, 2017 . . . [and] 

concluded that our internal control over financial reporting was not effective.”   

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IV.  Qi’s False Certifications 
 

93. Qi signed Gridsum’s Forms 20-F during the Relevant Period.  In each filing, Qi 

signed a certification, pursuant to Exchange Act Rule 13a–14, stating the following: 

1. I have reviewed this annual report on Form 20-F of Gridsum 
Holding Inc.; 
 
2. Based on my knowledge, this report does not contain any untrue 
statement of a material fact or omit to state a material fact necessary 
to make the statements made, in light of the circumstances under 
which such statements were made, not misleading with respect to 
the period covered by this report; 
 
3. Based on my knowledge, the financial statements, and other 
financial information included in this report, fairly present in all 
material respects the financial condition, results of operations and 
cash flows of the company as of, and for, the periods presented in 
this report; 
 
 

94. Qi’s certifications to these annual reports were false and misleading because he knew 

or was reckless in not knowing that Gridsum’s 2016, 2017 and 2018 annual reports did not disclose 

related party transactions, including the transactions with his wife and mother-in-law and Cloud 

Asia. 

95. Qi’s certifications to these annual reports were also false and misleading because he 

knew or was reckless in not knowing that Gridsum made payments to officers, directors, their 

family members and affiliates, including Qi’s wife, mother-in-law, and Cloud Asia. 

FIRST CLAIM FOR RELIEF 
Violations of Section 17(a)(1)-(3) of the Securities Act 

(Against Gridsum and Qi) 
 
96. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 95.  

97. Defendants, by engaging in the conduct above, singly or in concert with others, in 

the offer or sale of securities, by the use of means or instruments of transportation or 

communication in interstate commerce or by use of the mails, directly or indirectly: 

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a. Knowingly or recklessly employed a device, scheme, or artifice to defraud;   

b. Knowingly, recklessly, or negligently obtained money and property by means of 

untrue statements of material facts and omissions to state material facts necessary in 

order to make the statements made, in light of the circumstances under which they 

were made, not misleading; or 

c. Knowingly, recklessly, or negligently engaged in a transaction, practice, or course 

of business which operated or would operate as a fraud or deceit upon the purchaser.  

98. By engaging in the conduct described above, Defendants violated, and unless 

restrained and enjoined will continue to violate, Sections 17(a)(1)-(3) of the Exchange Act [15 

U.S.C. § 77q(a)(1)-(3)].  

 
SECOND CLAIM FOR RELIEF 

Fraud in Connection with the Purchase or Sale of Securities 
(Violations of Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder) 

(Against Gridsum and Qi) 
 

99. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 95. 

100. By reason of the conduct described above, Defendants, in connection with the 

purchase or sale of securities, by the use of the means or instrumentalities of interstate commerce or 

of the mails, or of any facility of any national securities exchange, directly or indirectly, knowingly 

or recklessly:  (1) employed devices, schemes, or artifices to defraud and/or (2) made untrue 

statements of material facts or omitted to state material facts necessary in order to make the 

statements made, in light of the circumstances under which they were made, not misleading; and/or 

(3) engaged in acts, practices, or courses of business which operated or would operate as a fraud or 

deceit upon any persons, including purchasers or sellers of the securities. 

101. Defendants acted with scienter in that they knowingly or recklessly engaged in the 

fraudulent conduct described above.   

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102. By reason of the actions alleged herein, Defendants violated and unless enjoined will 

continue to violate Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 

C.F.R. § 240.10b-5].    

THIRD CLAIM FOR RELIEF 
Violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 Thereunder  

(Against Defendant Gridsum) 
 

103. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 95. 

104. From September 26, 2016 through April 5, 2021, Gridsum, was an issuer of 

securities registered pursuant to Section 12 of the Exchange Act that filed required reports with the 

Commission under Section 13(a) of the Exchange Act and related rules and regulations that: (a) 

contained untrue statements of material fact; (b) failed to include, in addition to the information 

required to be stated in such report, such further material information as may be necessary in order 

to make the required statements, in light of the circumstances under which they were made, not 

misleading; or (c) failed to disclose any information required to be disclosed therein.  

105. By reason of the actions alleged herein, Defendant Gridsum violated and, unless 

restrained and enjoined, will continue violating Section 13(a) of the Exchange Act [15 U.S.C. §§ 

78m(a)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§ 240.12b-20 and 240.13a-1].  

FOURTH CLAIM FOR RELIEF 
Violations of Section 13(b)(2)(B) of the Exchange Act  

(Against Defendant Gridsum) 
 

106. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 95. 

107. By engaging in the conduct described above, Gridsum failed to devise and maintain 

a system of internal accounting controls sufficient to provide reasonable assurances that Gridsum’s 

corporate transactions were executed in accordance with management's authorization and in a 

manner to permit the preparation of financial statements in conformity with US GAAP; and 

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Gridsum’s access to assets is permitted only in accordance with management’s general or specific 

authorization, in violation of Exchange Act Section 13(b)(2)(B) [15 U.S.C. § 78m(b)(2)(B)].  

108. By reason of the foregoing, Gridsum violated Exchange Act Section 13(b)(2)(B) [15 

U.S.C. § 78m(b)(2)(B)]. 

FIFTH CLAIM FOR RELIEF 
Violations of Section 13(a)-14 of the Exchange Act Rules 

(Against Defendant Qi) 
 

109. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 95. 

110. Defendant Qi, as the principal executive officer of an issuer with a class of securities 

registered pursuant to Exchange Act Section 12 [15 U.S.C. § 781], certified to the best of his 

knowledge that one or more of the issuer’s periodic reports filed with the Commission contained no 

untrue statements of material fact or omissions of material fact when Qi knew or recklessly 

disregarded that the report or reports contained untrue statements of material fact or omissions of 

material fact. 

111. By reason of the foregoing, Defendant Qi violated and, unless enjoined, will again 

violate Rule 13a-14 [17 C.F.R. § 240.13a-14] promulgated under Exchange Act § 13(a) [15 U.S.C. 

§ 78m(a)]. 

SIXTH CLAIM FOR RELIEF 
Violations of Section 13b2-2 of the Exchange Act Rules 

(Against Defendant Qi) 
 

112. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 95. 

113. From May 2015 through June 2020, Defendant Qi, directly or indirectly, made or 

caused to be made materially false or misleading statements to an accountant in connection with 

audits and reviews of Gridsum’s financial statements or in the preparation or filing of Gridsum’s 

documents or reports required to be filed with the SEC; or omitted to state, or caused another person 

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 22  
 

to omit to state, material facts necessary in order to make statements made, in light of the 

circumstances under which such statement were made, not misleading, to an accountant in 

connection with audits and reviews of Gridsum’s financial statements or in the preparation or filing 

of Gridsum’s documents or reports required to be filed with the SEC.  

114. By reason of the foregoing, Defendant Qi violated and, unless enjoined, will again 

violate Exchange Act Rule 13b2-2 [17 C.F.R. § 240.13b2-2] promulgated under Exchange Act § 

13(b) [15 U.S.C. § 78m(b)]. 

 
SEVENTH CLAIM FOR RELIEF 

Aiding and Abetting Violations of Section 13(a) of the Exchange Act and Exchange Act Rules 
12b-20 and 13a-1 Thereunder  

(Against Defendant Qi) 
 

115. The Commission re-alleges and incorporates by reference here the allegations in 

paragraphs 1 through 95. 

116. By engaging in the conduct described above, Qi aided and abetted Gridsum’s 

violations of Sections 13(a) [15 U.S.C. §§ 78m(a)] and Exchange Act Rules 12b-20 and 13a-1 

thereunder [17 C.F.R. §§ 240.12b-20 and 240.13a-1], in that he, acting with the requisite state of 

mind, provided substantial assistance to Gridsum in committing these violations. 

117. By reason of the foregoing, Qi aided and abetted Gridsum’s violations of Sections 

13(a) [15 U.S.C. §§ 78m(a)] and Rules 12b-20 and 13a-1 thereunder [17 C.F.R. §§ 240.12b-20 and 

240.13a-1], which obligates issuers of securities registered pursuant to Section 12 of the Exchange 

Act [15 U.S.C. § 781] to file with the SEC periodic reports that are accurate and not misleading.   

118. By engaging in the conduct described above, Qi knowingly or recklessly provided 

substantial assistance to Gridsum’s filing of false and misleading annual reports with the SEC. 

119. By reason of the foregoing, Qi aided and abetted, and unless enjoined, will continue 

to aid and abet such violations. 

 

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EIGHTH CLAIM FOR RELIEF 
Disgorgement of Unjust Enrichment 
(Against Relief Defendant He Huijie) 

 
120. The Commission realleges and reincorporates paragraphs 1 through 95 as if fully set 

forth herein. 

121. As described above, Defendants engaged in a scheme to defraud investors in 

connection with the offer, purchase, or sale of securities of Gridsum and to use the money raised to 

unjustly enrich themselves, and Relief Defendant Ms. He, and others.  Ms. He has no legitimate 

claim to the funds, property and benefits described above, and has thus been unjustly enriched under 

circumstances in which it is not just, equitable, or conscionable for it to retain such profits. 

122. By reason of the foregoing, it would be inequitable for Relief Defendant Ms. He to 

retain the proceeds resulting from Defendants’ violations of the federal securities laws and such 

proceeds should be disgorged.  

PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that the Court enter a Final Judgment: 

I. 

Finding that the Defendants violated the provisions of the federal securities laws as alleged 

herein. 

II. 

Permanently restraining and enjoining Defendants and their agents, servants, employees and 

attorneys and all persons in active concert or participation with any of them from violating, directly 

or indirectly, Sections 17(a)(1)-(3) of the Securities Act [15 U.S.C. § 77q(a)(1)-(3)], Sections 10(b) 

and 13(a) of the Exchange Act [15 U.S.C. § 78j(b) and 15 U.S.C. §§ 78m(a)] and Rules 10b-5, 12b-

20 and 13a-1 thereunder [17 C.F.R. §§ 240.10b-5240.12b-20, and 240.13a-1]. 

 

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III. 

Permanently restraining and enjoining Defendant Gridsum and its agents, servants, 

employees and attorneys and all persons in active concert or participation with any of them from 

violating, directly or indirectly, Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 

78m(b)(2)(B)]. 

 
IV. 

Permanently restraining and enjoining Defendant Qi and his agents, servants, employees and 

attorneys and all persons in active concert or participation with any of them from violating, directly 

or indirectly, Rule 13a-14 [17 C.F.R. § 240.13a-14] and Rule 13b2-2 [17 C.F.R. § 240.13b2-2]. 

 
V. 

Ordering each Defendant and the Relief Defendant to disgorge all their ill-gotten gains, plus 

prejudgment interest thereon, pursuant to Sections 21(d)(3), (5) and (7) of the Exchange Act [15 

U.S.C. §§ 78u(d)(3), (5) and (7)]. 

 
VI. 

Ordering Defendants to pay civil monetary penalties in an amount determined by the Court 

pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the 

Exchange Act [15 U.S.C. § 78u(d)(3)]. 

 
VII. 

 
Permanently prohibiting Qi from serving as an officer or director of any company that has a 

class of securities registered under Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is 

required to file reports under Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)], pursuant to 

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Section 20(e) of the Securities Act [15 U.S.C. § 77t(e)] and Section 21(d)(2) of the Exchange Act 

[15 U.S.C. § 78u(d)(2)]. 

VIII. 

Granting any other and further relief as the Court may deem just and proper. 

 

JURY DEMAND 

The Commission demands a trial by jury on all issues so triable. 

 
Dated:  September 7, 2023    Respectfully submitted, 
 

/s/ Derek Bentsen 
  

      Derek Bentsen  
Kristen M. Warden* 
Michael T. Grimes* 
Adam Eisner* 
Attorneys for Plaintiff 
U.S. SECURITIES AND EXCHANGE 
COMMISSION 
100 F Street, N.E. 
Washington, DC 20594 
Phone: (202) 551-6426 (Bentsen) 
[email protected] 
Phone: (202) 551-4661 (Warden) 
[email protected] 
Phone: (202) 551-4861 (Grimes) 
[email protected] 
Phone: (202) 551-4871 (Eisner) 
[email protected]  
 

 
 

* Pending admission pro hac vice  
 
 
Of Counsel: 
Charles J. Felker 
100 F Street NE 
Washington, DC 
 
 

Case 1:23-cv-07924   Document 1   Filed 09/07/23   Page 25 of 25

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