Regulation

US SEC Settles Fraud Charges in $40M Ideanomics Crypto Misreporting Case

Published

3 months ago

August 10, 2024

The US Securities and Exchange Commission (SEC) has reached a settlement with Ideanomics Inc. for fraud charges involving significant material misrepresentations concerning the company’s financial performance, particularly in relation to its cryptocurrency revenue.

US SEC Settles Fraud Charges in Crypto Misreporting Case

The US SEC had charged Ideanomics, Inc. and several of its senior officers, including the former Chairman and CEO, Zheng (Bruno) Wu, of defrauding investors about the company’s financial conditions between 2017 and 2019. The allegations mainly relate to the company’s fraud in respect of revenue, especially in relation to crypto assets.

Subsequently, the financial regulator revealed that Ideanomics had reported revenues of over $40m for the year 2019 falsely because of fraudulent accounting regarding a crypto asset transaction. This deceitfulness resulted to over-estimated financial reports that loomed as a big fraud to the shareholders and the public.

Today we announced settled fraud charges against Ideanomics Inc., formerly Seven Stars Cloud Group Inc., and its former Chairman & CEO, Zheng (Bruno) Wu, for misleading the public about the company’s financial performance. https://t.co/7tLI2tnP7o
— U.S. Securities and Exchange Commission (@SECGov) August 9, 2024

Consequently, the investigation established that Ideanomics and Wu, as well as current CEO Alfred Poor and former CFO Federico Tovar, engaged in several frauds. These were providing false revenue guidance in 2017, providing the company’s auditor with a fraudulent letter of intent and hiding Wu’s personal interest in companies that did business with Ideanomics. According to the US SEC, these actions were unlawful under several provisions of the federal securities laws, including those prohibiting fraud, reporting and control.

Settlements and Penalties

Without admitting or denying the regulator’s findings, all the parties that are involved in the case have consented to the settlement of the charges. Wu has agreed to pay a sum in excess of $3.3 million in disgorgement, prejudgment interest and a $200,000 penalty. He also agreed that he shall not be allowed to hold any directorship or managerial position in any public company for the next ten years.

Tovar and Poor each consented to the entry of cease-and-desist orders and will each be required to pay a $75,000 penalty. In addition, Tovar will be barred from appearing and practicing as an accountant before the US SEC for at least two years. Also, Ideanomics has committed to make a payment of $1. 4 million penalty and to engage an independent compliance consultant to assess and enhance the company’s internal accounting controls.

Concurrently, the announcement of Ideanomics’ settlement with the US SEC comes as the U.S. Supreme Court considers an appeal of a securities fraud lawsuit against Nvidia Corporation. Nvidia faced accusations of providing false information concerning the percentage of its revenues coming from the cryptocurrency mining business.

The suit that was recently reinstated by the 9th U.S Circuit Court of Appeals accused Nvidia and its officials of providing false information to the investors regarding the Cryptocurrency mining revenue in 2017 and 2018. As reported by Coingape, the case, filed by Swedish investment management company E. Ohman J Fonder AB, seeks damages for the alleged violations of the Securities Exchange Act of 1934.