Shares of Ideanomics, an electric vehicle company, resumed their decline in OTC trading on Wednesday, August 14, after crashing over 60% and then rebounding 50% over the last few days. The stock initially plummeted after the U.S. SEC announced a settlement of fraud charges against Ideanomics and three of its senior executives. Without admitting or denying the charges, they agreed to pay a total of about $5 million.
Details
On Wednesday, Ideanomics shares lost as much as 50% in OTC trading to $0.15 apiece. Later, the losses shrank to approximately 17%.
The stock had slid 63% over two trading days, Friday, August 9, and Monday, August 12. On the latter day, it was down nearly 100% at one point, with quotes dropping to $0.0003 per share. There was a brief respite on Tuesday as Ideanomics rebounded 50% to $0.30 per share. However, the decline resumed on Wednesday.
Fraud allegations
The losses began on Friday after the SEC announced that it had settled charges of accounting and disclosure fraud against the company and three of its former and current senior executives.
According to the SEC, Ideanomics and its former CEO, Zheng (Bruno) Wu, misled investors about the company’s financial performance between 2017 and 2019. For instance, in November 2017, $300 million was guided for full-year revenue, despite what the SEC called “numerous known issues” indicating that the guidance would be missed “by a wide margin.” The company’s actual revenue for 2017 came in at only $144 million. In addition, Ideanomics and Wu are said to have misled the company’s auditor with a fraudulent letter of intent from a purportedly interested buyer of certain company assets to avoid writing down those assets. Finally, Wu is alleged to have unlawfully concealed his personal interest in transactions with two companies that received “millions” from Ideanomics.
The SEC said current Ideanomics CEO Alfred Poor and former CFO Federico Tovar also participated in the fraudulent scheme. In particular, the company and the three executives improperly accounted for a crypto asset deal in 2019, leading to an overstatement of the company’s revenue by more than $40 million.
“Ideanomics and its executives defrauded investors, including by misstating its financial statements and failing to disclose material information to investors,” said Stacy Bogert, associate director of the Division of Enforcement.
Without admitting or denying the SEC’s findings, the respondents agreed to a settlement. Wu will pay over $3.3 million in disgorgement and prejudgment interest, as well as a $200,000 fine; Tovar and Poor will each pay $75,000; and Ideanomics will pay an additional $1.4 million.
About Ideanomics
“Since its inception in 2004, Ideanomics has switched its business model at least three times, from video on demand to petroleum trading products to electronic vehicle services,” notes CFO Dive, with four name changes since 2017, including You-on-Demand, Wecast Network, Seven Stars Cloud Group, and finally Ideanomics. Starting in 2020, the company has focused on helping businesses and governments to transition their fleets to electric vehicles.
