SEC and Ideanomics Settle Cryptocurrency Revenue Fraud Charges
Date: 2024-08-12 Author: Henry Casey Categories: BUSINESS
The U.S. Securities and Exchange Commission (SEC) has reached a settlement with electric vehicle company Ideanomics over allegations of financial fraud and misleading the public about the company’s performance.
According to the SEC’s website, the investigation found that Ideanomics and its key executives made material misrepresentations in reporting financial results from 2017 to 2019. The allegations included, among other things, false information about the company’s revenue related to crypto assets.
Misrepresentation of Financial Performance
The SEC alleges that Ideanomics reported more than $40 million in revenue in 2019 based on fraudulent accounting related to a crypto asset transaction. This resulted in inflated financial performance, misleading shareholders and the public about the true health of the company.
The SEC and Ideanomics reached a settlement as the U.S. Supreme Court is considering an appeal of a separate securities fraud case against Nvidia, which is accused of misrepresenting its cryptocurrency mining revenue in 2017 and 2018. Nvidia’s situation is similar in many ways to the allegations against Ideanomics.
Key Players in the Case
The investigation involved former Chairman and CEO Zheng Wu, current CEO Alfred Poor, and former CFO Federico Tovar. The SEC found that these individuals engaged in various fraudulent schemes.
For example, in 2017, the company issued false revenue guidance, provided a fictitious letter of intent to the company’s auditor, and concealed Wu’s personal interests in companies that partnered with Ideanomics.
Settlements and Fines
As reported in the report, all parties agreed to settle the charges without admitting or denying the SEC’s findings. Wu agreed to pay more than $3.3 million in disgorgement, interest, and a $200,000 fine. He also agreed to a 10-year ban from holding positions at public companies.
Tovar and Poor each agreed to cease and desist and pay fines of $75,000. Tovar will also be barred from practicing accounting for at least two years.
Ideanomics agreed to pay a $1.4 million fine and hired an independent consultant to improve its internal accounting controls.
Nvidia agreed to pay $5.5 million to settle U.S. charges in 2022 related to its failure to adequately disclose the impact of crypto mining on the gaming business.
Earlier in March 2021, a US federal court dismissed a lawsuit against Nvidia, rejecting allegations that the company intentionally hid a significant portion of its revenue from cryptocurrency mining-related sales in 2017 and 2018.
