Firm says CEO taken into custody in US, but later released
Three US law firms－Rosen Law Firm, Schall Law Firm and Pomerantz LLP－announced on their official websites on Wednesday they are investigating whether Chinese e-commerce giant JD made false or misleading statements on the case of its founder and chairman Liu Qiangdong or failed to disclose information pertinent to investors.
They said they will invite shareholders who suffered losses to participate in the investigation and a possible class action lawsuit. The Schall Law Firm encourages investors with losses in excess of $100,000 to contact it.
JD's American depositary receipts fell $1.87 per share, or 5.97 percent, to close at $29.43 per share in Nasdaq trading, its lowest share price since February 2017, after Liu was held in Minneapolis, Minnesota, in the United States, on suspicion of criminal sexual misconduct and later released without any charges or bail.
"We were informed that our CEO Liu Qiangdong was taken into custody by Minneapolis police on Aug 31. He has been released without any charges, and without requirement for bail. Liu has returned to work in China," JD said in statement released on Tuesday.
The company also said in a statement on the social media site Sina Weibo on Sunday that Liu was falsely accused of sexual misconduct while in the US on a business trip, and that police investigators found no misconduct.
Liu appeared at JD headquarters in Beijing on Tuesday morning, where he attended a signing ceremony with Chinese textiles group Shandong Ruyi.
However, a Minneapolis police report said the arrest of Chinese billionaire Liu Qiangdong was over a felony rape accusation.
According to the Minnesota Act, the maximum term for a first-degree sexual abuse offense is 30 years and the minimum is 12 years. Jail records from Hennepin county, Minneapolis, show Liu was held at 11:32 pm on Friday and released at 4 pm on Saturday, pending further investigation and possible criminal charges. The jail records do not provide details of the alleged incident.
Shen Meng, director of boutique investment bank Chanson & Co, said as a US-listed company, the statement from JD is not professional and if the company is really involved in issuing materially misleading business information to the investing public, it might be punished severely or even be delisted from the US bourses.
Shen added its public relations practitioners are mainly Chinese who are not familiar with the US regulatory system. There is a system of class-action lawsuits in the US, in which law firms solicit plaintiffs in order to make money, according to Shen.
If the US police accuse Liu, the company's share price would continue to fall, but it was predicted that there would not be a sharp crash due to an already sharp decline this year, Reuters quoted Danny Law, an analyst at brokerage Guotai Junan as saying.