SEC Charges Ideanomics, Current and Former Execs, with Accounting Fraud

SEC Charges Ideanomics and Three Senior Executives with Accounting and Disclosure Fraud

The Securities and Exchange Commission today announced settled fraud charges against Ideanomics, Inc., formerly known as Seven Stars Cloud Group, Inc., and its former Chairman and CEO, Zheng (Bruno) Wu, for misleading the public about the company’s financial performance between 2017 and 2019. The SEC also announced settled charges against Ideanomics’ current CEO, Alfred Poor, and former CFO, Federico Tovar, for their roles in the scheme.

The SEC’s orders allege that, in mid-November 2017, Ideanomics and Wu reported 2017 revenue guidance of $300 million, despite numerous known issues indicating that the company would miss this guidance by a wide margin. The company later reported only $144 million in 2017 revenues. Ideanomics and Wu also misled the company’s auditor with a fraudulent letter of intent from a purportedly interested buyer of certain assets to avoid writing down those assets by $17 million in 2017, and Wu improperly hid his personal interest in two companies that received millions in cash and stock from deals with Ideanomics between 2017 and 2019, according to the orders. The SEC further alleged that Ideanomics, Wu, Poor, and Tovar improperly accounted for a deal involving crypto assets in 2019, resulting in the company’s overstatement of revenues by more than $40 million, and made false representations in company financial statements.

High Court Jarkesy Ruling Boosts Suit Over Auditor, CPA Says

A recent US Supreme Court decision, weakening the SEC’s enforcement power, bolsters a conservative-backed legal group’s lawsuit against the US audit regulator, the group argued in a legal filing.

The New Civil Liberties Alliance, representing an unnamed Tennessee-based accountant, filed an amended complaint Thursday against the Public Company Accounting Oversight Board in the US District Court for the Middle District of Tennessee. The board, under the US Securities and Exchange Commission’s oversight, audits public company auditors. The complaint asks the court to enjoin the board’s proceedings against Doe and declare them unconstitutional.

What the NYT and Washington Post Op-Eds Get Wrong About Crypto

Even the SEC now agrees that neither BTC nor ETH are securities, and judges appointed by Democrats have also disagreed with the SEC Chair’s claim that the law is clear. Every other major developed country and trading block, from Japan and the United Kingdom to the European Union, has responded to the novel questions posed by crypto by providing new regulation and legislation. In the U.S., however, the SEC has decided to do the governmental equivalent of jamming its fingers in its ears and screaming at companies that they are lawbreakers. This is activity that is not befitting any regulator, and should be the stuff of editorial board scorn — not accolades. The reality is that crypto is here to stay, and the question on the table is simply whether the United States waves goodbye as the next wave of innovation flows offshore.

NERA: First Half Securities Suit Filings Roughly Level with Last Year’s Pace

The number of federal court securities class action filings in the year’s first half project to a year-end total roughly level with year-end total number of suit filings last year, while case resolutions (dismissals and settlements) are on track to exceed 2023 levels, according to a recent report from NERA. The August 6, 2024, report, entitled “Recent Trends in Securities Class Action Litigation: 2024 H1 Update,” can be found here.

According to the report, there were 112 federal court securities class action lawsuit filings in the first six months of 2024, of which 106 were standard securities suits (alleging violations of Rule 10b-5, Section 11, or Section 12). The number of merger objection lawsuits and suits involving unregistered crypto securities continued to decline in the first half of 2024, with only two suit filings in each of these categories. The 112 first half federal court securities suit filings projects to a year-end total of 224, which would be slightly below the 228 securities suit filings for the full year 2023, but above the year-end totals for 2022 (206) and 2021 (210).

USDT Issuer Tether to Fight Celsius’ $3.3 Billion ‘Shakedown’ Litigation

Tether, the company behind USDT, the world’s largest stablecoin by market capitalization, said it will defend itself against what it called “shakedown” litigation brought by bankrupt crypto lender Celsius.

On Friday, Celsius asked the U.S. Bankruptcy Court of the Southern District of New York to order Tether to relinquish a total of 57,428.64 bitcoin (BTC) or award the “present value of all Bitcoin,” some $3.3 billion at today’s price, according to a court filing.”

This lawsuit incredibly now seeks the return of approximately US$2.4 billion worth of BTC from Tether, despite the BTC being liquidated at Celsius’ direction and with Celsius’ consent at June 2022 prices,” Tether said in a statement on its website. Tether did not say how it calculated the $2.4 billion figure.