I think the case is more about CWN not disclosing to investors...

I think the case is more about CWN not disclosing to investors that they were doing the "wrong thing" or "right thing" in China, depending on how you choose to look at it. They secretly dialed up the risk v reward, and as an investor you may have assumed they were following the Chinese governments directives. Even JP resigned as a director over that time - so it is possible even he didn't feel the risk v reward of being a director or officer was worth it at that time.