U.S. charges exiled Chinese businessman Guo Wengui with $1 billion fraud

[March 16, 2023]  By Jonathan Stempel

NEW YORK (Reuters) -The U.S. government on Wednesday charged Guo Wengui, an exiled Chinese businessman with ties to former Donald Trump adviser Steve Bannon, with leading a complex conspiracy to defraud Guo's online followers out of more than $1 billion.

Authorities said Guo, with help from longtime financial adviser Kin Ming Je, cheated thousands of followers since 2018 by promising "outsized" investment returns, but diverting much of their money to fund lavish lifestyles for himself and his family.

The alleged improper purchases included a $37 million yacht, a 50,000 square-foot mansion in northern New Jersey, a $3.5 million Ferrari for Guo's son, a $62,000 TV, and two $36,000 mattresses, according to authorities.

Guo, 52, was charged with 11 criminal counts including securities fraud, wire fraud and concealment of money laundering, after "lining his pockets with the money he stole," U.S. Attorney Damian Williams in Manhattan said in a statement.

The defendant was arrested on Wednesday morning, and pleaded not guilty in Manhattan federal court before U.S. Magistrate Judge Katharine Parker, who ordered him detained without bail.

Guo wore a black shirt, black pants and brown shoes to the courtroom. He was not handcuffed, and brought his hands together in a prayer sign toward spectators before being led out.

Lawyers for Guo did not immediately respond to requests for comment. They will propose a "robust bail package," according to Tamara Giwa, a federal public defender who represented Guo at Wednesday's hearing. His next court appearance is April 4.

BANNON ASSOCIATE

Guo, who has used other names like Ho Wan Kwok and Miles Kwok, has been a business associate of Bannon, who was arrested in a fraud case in August 2020 while aboard Guo's yacht, the Lady May.

Trump pardoned Bannon in the final hours of his presidency. Bannon is not accused of wrongdoing in Guo's criminal case.

The U.S. Department of Justice said it seized and is seeking the forfeiture of $634 million of Guo's alleged fraud proceeds from 21 bank accounts, including several at the now-closed Silvergate Bank.

It said it also seized assets purchased with proceeds from Guo's alleged fraud, including a Lamborghini Aventador, and wants Guo to forfeit the yacht.

The criminal charges carry several decades of potential prison time. Guo also faces related U.S. Securities and Exchange Commission civil charges.

Guo Wengui (also known as Miles Kwok) holds a news conference with Steve Bannon in New York, New York, U.S., November 20, 2018. REUTERS/Carlo Allegri

Je, who lives in London and is also known as William Je, faces the same 11 criminal counts plus an obstruction charge. He is at large.

Guo is a prominent critic of China's Communist Party.

He left that country in 2014 during an anti-corruption crackdown under President Xi Jinping, and has been accused there of crimes including bribery and money laundering. Guo has denied wrongdoing.

'SERIAL FRAUDSTER'

Following Guo's arrest, a fire broke out on the 18th floor at the Sherry-Netherland hotel, where he has an apartment, on Manhattan's Upper East Side.

A spokesman for New York City's fire department said no injuries were reported and officials were investigating. He declined to say if they were examining any connection to Guo's arrest.

Court papers filed on Wednesday described a web of offerings that according to prosecutors targeted investors aligned with Guo's policy objectives in China, and inclined to believe the self-proclaimed billionaire when it came to investing.

"We allege that Guo was a serial fraudster," SEC enforcement chief Gurbir Grewal said in a statement.

Prosecutors said that in one offering, Guo raised $262 million through a cryptocurrency "ecosystem" called the Himalaya Exchange, which promised a so-called H Coin, also known as Himalaya Coin or HCN, with an estimated $27 billion valuation.

The indictment quoted from an October 2021 video in which Guo allegedly said 20% of H Coin's value was backed by gold, and that he would fully reimburse investors who lost money.

"Whoever loses money, I will bear it," Guo was quoted as saying.

In February 2022, Guo filed for Chapter 11 bankruptcy in Connecticut after a New York judge ordered him to pay $134 million for moving the Lady May out of a lender's reach.

(Reporting by Jonathan Stempel, Luc Cohen and Tyler Clifford in New York, and Chris Prentice in Washington, D.C.; Editing by Marguerita Choy, Daniel Wallis, Bill Berkrot and David Gregorio)

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