Investors accuse transfer agent, IR firm of concealing shares in $300M fraud

A transfer agent and investor relations firm allegedly helped conceal 240 million secretly issued shares, enabling a $300 million pump-and-dump fraud.

Six investors filed a class action lawsuit on January 30 against China Liberal Education Holdings Ltd., a NASDAQ-listed Chinese education company, its executives, and key service providers over what they describe as a brazen securities fraud that wiped out retirement savings and left hundreds, if not thousands, of retail investors holding worthless stock.

The case, filed in the Southern District of New York, places Transhare Corporation, an SEC-registered transfer agent based in Florida, and Ascent Investor Relations LLC, a firm with offices in New York City and China, at the center of a scheme that allegedly manipulated share counts and misled regulators.

According to court filings, CLEU's management orchestrated a series of share issuances in December 2024 that put more than 250 million shares into the hands of individuals later indicted on federal fraud charges.

The critical allegation: 240 million of those shares were issued on December 31, 2024, but deliberately concealed from the market, the SEC, and NASDAQ for nearly a month.

Transhare, which served as the company's transfer agent, allegedly failed to notify regulators of the massive issuance despite having issued the shares. The lawsuit goes further, claiming Transhare vouched for the legitimacy of the shares to brokerage firms including Charles Schwab and eToro, assuring them the securities were validly issued and freely tradeable while knowing public records showed no such issuance had occurred.

Ascent Investor Relations allegedly drafted a January 13, 2025 press release announcing CLEU had regained compliance with NASDAQ listing standards. That release made no mention of the 240 million shares already in circulation. The market believed roughly 29 million shares were outstanding. The actual figure was nearly ten times higher.

With the true share count hidden, a parallel operation unfolded on social media. Fraudsters allegedly recruited victims through Facebook and Instagram advertisements promoting fake investment clubs tied to well-known figures including Kevin O'Leary, Tom Lee, and Cathie Wood. Those who clicked through were funneled into WhatsApp groups where individuals posing as financial advisors pushed CLEU stock with promises of 380 percent returns.

Beginning January 22, 2025, victims received instructions to purchase shares at specific price points. On the other side of those trades sat the alleged co-conspirators, unloading their secretly issued holdings at artificially inflated prices.

The scheme unraveled on January 29, 2025, when regulatory filings finally revealed the true share count. CLEU's stock opened the next day at $1.03, down from $7.75. By market close, shares traded below 15 cents, a single-day collapse of 98 percent.

The human toll is stark. Plaintiffs Atul Shah and his wife Amita Shah, a retired pharmacist, lost approximately $1.8 million, representing 30 years of retirement savings. Joshua Bouck, a Los Angeles County Fire Captain who was fighting the Southern California wildfires when he was drawn into the scheme, lost more than $850,000 and has since taken out a home equity loan and worked endless overtime to recover.

Seven individuals identified in the lawsuit as the Cedric Indictees face separate federal criminal charges in the Northern District of Illinois. Federal authorities have seized approximately $214 million of their alleged proceeds.

The lawsuit asserts claims under Section 10(b) and Section 20(a) of the Securities Exchange Act and the civil provisions of the Racketeer Influenced and Corrupt Organizations Act. The plaintiffs are seeking compensatory damages, treble damages, and attorneys' fees.

No determination on the merits has been made.