SEC settles accounting, disclosure fraud charges with Ideanomics

The Securities and Exchange Commission announced Friday it settled fraud charges against electric vehicle company Ideanomics and its former chairman and CEO Zheng (Bruno) Wu for misleading the public about its financial performance between 2017 and 2019. 

The SEC alleged that Ideanomics and Wu reported revenue guidance of $300 million in 2017 despite numerous known issues indicating that the company would miss this guidance by a significant margin. The company later reported $144 million in revenues. 

The complaints also claimed that Ideanomics and Wu provided their auditor with a fraudulent letter of intent from a purportedly interested buyer to avoid a $17 million writedown on certain assets. Wu also allegedly hid his personal interest in two companies that received millions in cash and stock from deals with Ideanomics. 

Ideanomics’ current CEO Alfred Poor and its former CFO Frederico Tovar were also charged for their roles in the scheme. The SEC claimed that Ideanomics, Wu, Poor and Tovar improperly accounted for cryptocurrency assets, resulting in overstating the company’s revenues by more than $40 million.

The SEC found that Wu violated antifraud, reporting, internal control, and books and records provisions of the federal securities laws and caused some of the company’s violations. In its order against Ideanomics, Poor and Tovar, it found that Ideanomics violated antifraud, reporting, internal control, and books and records provisions of federal securities laws, and that Poor and Tovar violated the antifraud, reporting, and books and records provisions and caused some of the company’s violations. 

All respondents, without admitting or denying the SEC’s findings, settled the matter by agreeing to cease and desist from future violations of the charged provisions. Wu agreed to pay more than $3.3 million in disgorgement and prejudgement interest and a $200,000 penalty, as well as a 10-year officer and director bar. Tovar and Poor each agreed to pay a $75,000 penalty; Tovar agreed to a two-year suspension from practicing as an accountant. Finally, Ideanomics agreed to pay a $1.4 million penalty and to retain an independent compliance consultant. 

“As we alleged, Ideanomics and its executives defrauded investors, including by misstating its financial statements and failing to disclose material information to investors,” Stacy Bogert, associate director of the division of enforcement, said in a statement. “The investing public must be able to trust the accuracy of a company’s disclosures, and we will hold accountable executives who abuse that trust by engaging in fraud.”