Dive Brief:

• The Securities and Exchange Commission required that the former CEO of Ideanomics pay $3.3 million in disgorgement and a $200,000 penalty for allegedly defrauding investors with false statements about the company’s financial performance from 2017 until 2019.
• The SEC alleged that, in November 2017, Ideanomics and its former CEO, Zheng (Bruno) Wu, reported $300 million in revenue guidance despite several indications that the company would miss the target by a wide margin. Ideanomics later reported only $144 million in reported revenue for the year. The agency also leveled fraud charges against the company’s current CEO and former CFO.
• “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 SEC’s Enforcement Division, said in a statement. “The investing public must be able to trust the accuracy of a company’s disclosures.”

Dive Insight:

The SEC alleged that Wu’s improper behavior extended beyond misleading information about revenue. To avoid writing down assets by $17 million in 2017, Wu provided the auditor for Ideanomics with a fraudulent letter of intent from a purportedly interested buyer of some of the company’s assets, the SEC said.

The agency also alleged that Wu hid from Ideanomics management his control of Hong-Kong-based Tiger Sports Media and Beijing Financial Holdings, which between 2017 and 2019 received millions in cash and stock from deals with Ideanomics.

“Wu falsely told company management that those entities were not related to him or his companies, and company management failed to properly investigate Wu’s connection to those entities,” the SEC said.

“In fact, Wu exercised control over Tiger Sports and Beijing Financial and used cash and other assets from those companies for his personal benefit,” the agency said.

Finally, the SEC alleged that Wu, current Ideanomics CEO Alfred Poor and former CFO Federico Tovar in 2019 broke accounting rules when recording a crypto asset deal, overstating revenues by more than $40 million.

Tovar and Poor each agreed to pay a $75,000 penalty, and Tovar agreed to be suspended from appearing and practicing before the SEC as an accountant for at least two years, the agency said.

Since its inception in China in 2004, Ideanomics has engaged in a range of activities, providing video-on-demand from 2010 through 2017 under the “You-on-Demand” brand name, with primary operations in China, the SEC said.

Beginning in early 2017, the company changed its name several times, first to “Wecast Network,” then to “Seven Stars Cloud Group” and finally to Ideanomics, the agency said. It also changed its business model, attempting to develop petroleum trading products, artificial intelligence and financial technology.

Ideanomics in 2020 switched to its current business of assisting businesses and governments in transitioning their fleets from gas to electric vehicles, the SEC said.

The company markets itself as “your one-stop partner for an EV future.”

“By bringing proprietary vehicle and charging technologies together, we simplify the transition and operation of EV fleets,” Ideanomics says on its website. It is traded over the counter under the ticker IDEX.