Ideanomics pays a $1.4M SEC fine for inflating sales by $40M from crypto deals.
Former CEO Zheng Wu was banned for 10 years and settled for $3.5M.
SEC imposes tighter controls and demands a compliance consultant for Ideanomics.
The SEC has resolved allegations of fraud against Ideanomics, an electric vehicle company, regarding reporting and misleading the public about the company's performance. Through this resolution, the company and some key leaders have addressed allegations of misleading investors about their status, particularly concerning earnings from transactions from 2017 to 2019.
https://twitter.com/SECGov/status/1822017718167433305
Following SEC inquiries, it was found that Ideanomics, along with Zheng Wu, the former chairman and CEO, and some other top executives, were involved in distorting the company's actual financial status. The reported sales figures in 2019 were greatly inflated, showing over $40 million in misleading accounting related to cryptocurrency asset dealings.
Consequences and Penalties
The settlement demands Ideanomics to pay a $1.4 million penalty without admitting or denying the findings. In addition, Ideanomics will recruit an independent compliance consultant to evaluate and improve internal financial controls.
Zheng Wu agreed to settle for over $3.3 million in repayment interest before a judgment and a fine of $200,000. Additionally, Wu agreed to a ten-year prohibition from holding positions as an executive or board member in a traded company.
Former CFO Federico Tovar and current CEO Alfred Poor settled for monetary penalties of $75,000 each. Tovar agreed to a two-year suspension from appearing and practising as an accountant before the Commission.
Related Legal Challenges in the Sector
The Ideanomics settlement is part of a trend of heightened regulatory scrutiny of cryptocurrency companies. The United States Supreme Court is considering a request for review in a securities fraud complaint against Nvidia Corporation, which includes similar accusations. The lawsuit accuses Nvidia of providing information regarding its earnings from cryptocurrency mining operations. This legal challenge is a sign of the growing emphasis among regulators on transparent and candid financial disclosures on crypto assets.
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