Key Takeaways
- The company had projected $300 million in revenue for 2017, but ultimately reported just $144 million.
- As part of the settlement, Zheng Wu will pay over $3.3 million in fines and disgorgement and is banned from holding any managerial or director roles in public companies for ten years.
On August 8, 2024, the U.S. Securities and Exchange Commission (SEC) announced a settlement with Ideanomics, Inc., settling allegations of fraud related to the company’s financial reporting. Ideanomics, previously known as Seven Stars Cloud Group, and several of its top executives were accused of misleading investors about the company’s financial health from 2017 to 2019.
The SEC’s investigation found that Ideanomics, led by former Chairman and CEO Zheng (Bruno) Wu, made several false claims about its revenue. The company had projected $300 million in revenue for 2017, but ultimately reported just $144 million. Additionally, Ideanomics was found to have used a fake letter of intent to mislead its auditor and avoid a $17 million asset write-down.
The SEC also discovered that Ideanomics improperly accounted for a crypto asset transaction in 2019, which led to an overstatement of revenues by more than $40 million. This misreporting skewed investors’ understanding of the company’s financial situation.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, stressed the importance of truthful financial reporting. “Investors need to trust the accuracy of a company’s disclosures,” she said. “We will hold accountable those who undermine this trust through fraudulent activities.”
As part of the settlement, Zheng Wu will pay over $3.3 million in fines and disgorgement and is banned from holding any managerial or director roles in public companies for ten years. Current CEO Alfred Poor and former CFO Federico Tovar will each pay $75,000 in penalties.
Tovar has also been suspended from practising as an accountant for at least two years. Ideanomics will pay a $1.4 million penalty and hire an independent consultant to overhaul its accounting practices.
