October 5, 2022

On Wednesday, the Securities and Trade Fee (SEC) instituted Stop-and-Desist proceedings in opposition to Sheng Fu and Ming Xu (Respondents) pursuant to Part 8A of the Securities Act of 1933 and Part 21C of the Securities Trade Act of 1934.

Respondents are current or former officers of Cheetah Cell, Inc. The SEC Order instituting the continuing additionally units forth an agreed Stop-and-Desist Order imposing a “civil cash penalty” on every respondent and imposing sure restrictions on Respondents’ skill to commerce in Cheetah Cell securities going ahead. The SEC’s motion arose of Respondents’ alleged gross sales of Cheetah Cell’s securities whereas in possession of fabric personal data and misrepresenting a “identified detrimental development” relating to promoting revenues in analyst communications and SEC filings.

The doc incorporates detailed “findings” by the SEC “made pursuant to Respondents Presents of Settlement and aren’t binding on another particular person or entity on this or another continuing.”

Respondent Shen Fu “is, and was throughout the related interval, CEO
of Cheetah Cell.” Respondent Ming Xu “was President and CTO of Cheetah Cell
throughout the related interval.” Respondent “Ming Xu resigned from Cheetah Cell
in June 2018.” Each Respondents are residents of China.

“Cheetah Cell, integrated within the Cayman Islands with a
principal office in Beijing, China, is a cellular web firm.” Cheetah
Cell’s American Depositary Shares are traded on the New York Inventory Trade,
and the corporate is a “international personal issuer required to file annual experiences
with the Fee on Type 20-F.”

In 2015 and 2016 China Cell “earned as much as one-third of its
revenues by putting inside its functions third-party commercials supplied
by its largest promoting associate, an promoting division of a significant social
media platform (the ‘Promoting Associate’).”

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Throughout the summer season of 2015, the Promoting Associate suggested
Cheetah Cell that it was altering its “algorithm that decided charges for advert
placements, and that, except Cheetah Cell improved the standard of its advert
placements, the algorithm may halve the revenues that the Promoting Associate
paid to Cheetah Cell.”  By the top of
2015, it was clear that Cheetah Cell “wouldn’t have the ability to implement a
resolution that might forestall a drop-off in revenues from the Promoting Associate
algorithm change, and Cheetah Cell’s revenues from the Promoting Associate
started to say no.”

The SEC discovered that in its quarterly convention name in March 2016 and in its 20-F type for the 12 months 2015, Cheetah Cell did not disclose this “identified detrimental development.” Shortly thereafter, “On Could 19, 2016, Cheetah Cell “disclosed its lower-than-expected second quarter 2016 income steering and introduced that it didn’t count on to fulfill its beforehand issued income and earnings steering for the total 12 months 2016.” Cheetah Cell’s inventory fell 18%.

Previous to the Could 2016 disclosure, the Respondents created a
10b5-1 plan, and thru a collectively managed entity, offered Cheetah Cell
securities, and thereby “prevented losses of $203, 290 [Sheng Fu] and $100,127
[Ming Xu] respectively.”

The Respondents’ undertakings pursuant to the Stop and Desist
Order typically mandate the people to advise the SEC of their transactions
in Cheetah Cell securities for 5 years. As well as and most
considerably, Respondent Sheng Fu pays a civil cash penalty of $550,580;
and Respondent Ming Xu pays a civil cash penalty of $200,254.

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