SEC and Ideanomics settle in fraudulent $40M crypto revenue reporting

The US Securities and Exchange Commission (SEC) has settled with Ideanomics Inc. over charges of fraudulent financial reporting, including misleading information about the company’s cryptocurrency revenue. 

According to a report on the SEC website, the SEC’s investigation revealed that between 2017 and 2019, Ideanomics, Inc. and several of its senior officers engaged in significant material misrepresentations about the company’s financial performance. The charges specifically involved misleading investors about the company’s revenue from crypto assets.

Misleading financial performance

The SEC alleged that Ideanomics reported revenues of over $40 million for 2019 based on fraudulent accounting related to a crypto asset transaction. This false reporting led to overestimated financial statements, deceiving shareholders and the public about the company’s financial health.

The settlement with Ideanomics comes as the US Supreme Court considers an appeal in a separate securities fraud lawsuit against Nvidia Corporation. Nvidia is accused of providing false information regarding its cryptocurrency mining revenue in 2017 and 2018, similar to the accusations faced by Ideanomics.

The Nvidia case, reinstated by the 9th US Circuit Court of Appeals, underscores the increasing scrutiny of companies reporting their involvement in the crypto industry.

Key figures involved

The Ideanomics investigation implicated several vital figures at Ideanomics, including former Chairman and CEO Zheng (Bruno) Wu, current CEO Alfred Poor, and former chief financial officer Federico Tovar. The SEC found that these individuals were involved in multiple fraudulent activities.

Related: Judge finds Ripple Labs liable for $125M penalty in SEC case

These included issuing false revenue guidance in 2017, providing the company’s auditor with a fraudulent letter of intent, and concealing Wu’s personal interest in companies conducting business with Ideanomics.

Settlement and Penalties

According to the report, all parties involved have agreed to settle the charges without admitting or denying the SEC’s findings. Wu consented to pay over $3.3 million in disgorgement, prejudgment interest, and a $200,000 penalty. Additionally, Wu agreed to a 10-year ban from holding any directorship or managerial position in a public company.

Tovar and Poor each consented to cease-and-desist orders and will pay $75,000 in penalties. Tovar will also be barred from appearing and practicing as an accountant before the SEC for at least two years.

Ideanomics, on its part, has agreed to pay a $1.4 million penalty and will engage an independent compliance consultant to review and enhance its internal accounting controls.

In 2022, Nvidia agreed to pay US authorities $5.5 million to settle charges that did not adequately disclose the impact of crypto mining on its gaming business.

A federal judge dismissed a lawsuit against Nvidia in March 2021, rejecting claims that the company had deliberately concealed a substantial portion of its revenue from cryptocurrency mining sales in 2017 and 2018.