SEC Charges Cloopen Group With Accounting Fraud for Prematurely Recognizing Revenue

SEC Charges China-Based Tech Company Cloopen Group with Accounting Fraud

The Securities and Exchange Commission today announced settled accounting fraud charges against Cloopen Group Holding Limited, a China-based provider of cloud communications products and services whose American depositary shares formerly traded on the New York Stock Exchange. The SEC determined not to impose civil penalties against Cloopen because the company self-reported its accounting issues, cooperated extensively with the staff’s investigation, and undertook prompt remedial measures.

According to the SEC’s order, two senior managers who led Cloopen’s strategic customer contracts and key accounts department orchestrated a fraudulent scheme from May 2021 through February 2022 to prematurely recognize revenue on service contracts. The order finds that, facing pressure to meet strict quarterly sales targets, the two senior managers directed their employees to improperly recognize revenue on numerous contracts for which Cloopen had either not completed work or, in some instances, not even started work. As a result of this misconduct and other accounting errors, Cloopen overstated its unaudited financial results for the second and third quarters of 2021 and its announced revenue guidance for the fourth quarter of 2021.

Ex-Officials Fret Hacked Firms, Fearing Legal Liability, Will Keep Law Enforcement in Dark

Former government officials say they fear the Securities and Exchange Commission’s fraud lawsuit against the IT company SolarWinds and its chief information security officer over its massive 2019-2020 data breach will cause many companies to ”think twice” about reporting cyberattacks to law enforcement.

They say that those attacks, often originating overseas, are a mounting threat to the nation’s national security and that close cooperation and information-sharing between the public and private sectors is a key line of defense.

“A CISO or company concerned that the preliminary information about a cybersecurity incident or vulnerability it shares with law enforcement or industry may be treated in hindsight as something that should have been disclosed publicly may think twice before sharing that information in the first place,” says an amicus brief filed Friday by 20 former federal law enforcement and national security officials.

“As it evaluates this action, we would therefore urge this court to consider the importance of public-private sector sharing of cybersecurity threat information to the nation’s ability to prevent and respond to cyberattacks.”

Big Four Lobby Congress on Accounting Pipeline, AI, Crypto

The Big Four firms targeted a portion of their millions in Capitol Hill spending last year on a pivotal problem facing the industry: shoring up a dwindling supply of qualified accountants.

Deloitte LLP, Ernst & Young LLP, KPMG LLP, and PwC LLP spent a combined $9.4 million directly lobbying Congress in 2023, focusing on issues such as digital assets and immigration requirements. Three of the firms also joined industry efforts to designate accounting as a science, technology, engineering and math—or STEM—field, according to federal lobbying disclosures.

Those efforts, along with a revamped CPA exam and other initiatives, aim to address the deepening drought of accountants in the US and to solidify the field’s standing as a tech-savvy profession.

“They view this as one of many important steps they’re taking to improve the perception of accounting, to get people to understand that it’s really not about punching calculators anymore,” said Liz Kolar, executive vice president of KnowFully Learning Group, of the industry’s efforts. “We are really a technology-driven field.”

Adam Neumann Wants We Back

Man he is really going to do the funniest trade in the whole history of financial markets….

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Here is the letter, from Dealbook. The short version of this trade is that Adam Neumann started WeWork, sold it to SoftBank Group Corp. head Masayoshi Son for $47 billion in one of the greatest feats of salesmanship ever, left, watched it collapse, and will now buy it back for $0….

South Korea Crypto Criminals Face Lifetime in Jail

Crypto criminals will face life imprisonment in South Korea when new consumer protection rules take effect this July, the country’s financial regulator said Wednesday.

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If proceeds from crime exceed 5 billion won ($3.8 million), the perpetrators can face a life sentence, the notice added.

China, Battling a Stock-Market Rout, Replaces Its Top Securities Regulator

China has removed its top securities regulator, following a yearslong stock-market decline that has become an increasingly sensitive subject for Beijing officials in recent days.

Yi Huiman, chairman of the China Securities Regulatory Commission, is being replaced by Wu Qing, deputy party secretary of Shanghai, according to a state news agency.

The FCPA Blog is coming to an end

2024 marks our seventeenth year of publishing. It’s been an incredible journey, and we’re proud of our work.

It was a difficult decision. We’ll continue posting over the next couple of weeks. We’ll hear from some familiar voices. Then, the curtain will close.

Supreme Court Considers Whether Pure Omissions Can Support Section 10(b) Liability

U.S. regulators don’t have any more authority now to head off another On January 16, 2024, the U.S. Supreme Court held oral argument on a question that could have significant consequences for securities litigants: whether a failure to disclose information under Item 303 of Regulation S-K is, standing alone, an actionable omission under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. While it remains to be seen what the Court will ultimately decide, the Justices’ questions signaled a narrow ruling that would foreclose such liability.