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HF Foods Group Agrees to $3.9 Million Penalty in SEC Fraud Settlement

Food service distributor HF Foods Group has agreed to pay a $3.9 million penalty as part of a settlement with the Securities and Exchange Commission (SEC) regarding alleged fraudulent conduct by its former chief executive officer and chief financial officer. The settlement, announced during an administrative proceeding on Thursday, follows charges the SEC levied earlier this week against former HF Foods CEO Zhou Min Ni and former CFO Jian Ming Ni. Zhou Min Ni will pay a $300,000 penalty, while Jian Ming Ni will pay $80,000.


HF Foods Group Agrees to $3.9 Million Penalty in SEC Fraud Settlement

From August 2018 through 2020, the former executives allegedly misappropriated approximately $3.4 million from HF Foods through related party transactions and other methods, according to the SEC's order. The SEC also alleged that the executives schemed to remove $7.4 million of liabilities from a predecessor company’s books as part of HF Foods going public via a special purpose acquisition company.


Due to these alleged actions, HF Foods’ public filings during the relevant period contained materially inaccurate financial statements and other false and misleading statements, the SEC stated. In 2023, the company conducted an internal investigation into the matter, which resulted in the restatement of its financial statements for fiscal years 2019 and 2020. HF Foods was accused of violating the antifraud and other provisions of federal securities laws.


Cyprus Company Formation

Accounting irregularities at HF Foods were brought to light by a financial research company in March 2020, according to the SEC. Following the report, HF Foods appointed external counsel to conduct an “extensive internal investigation” into the allegations. After the probe, the company removed the culpable individuals from its management, improved its disclosure controls and procedures, and strengthened its internal compliance program.


HF Foods also established a litigation committee to pursue legal claims against Zhou Min Ni, Jian Ming Ni, and others, resulting in settlements that benefited the company, the SEC noted.


HF Foods did not respond to a request for comment. The company neither admitted nor denied the SEC’s findings in reaching the settlement.

By fLEXI tEAM

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