The Foreign Corrupt Practices Act has always been a law much broader than its name suggests.

Sure, the FCPA contains anti-bribery provisions which concern foreign bribery.

Sure, the FCPA’s books and records and internal controls provisions can be implicated in foreign bribery schemes.

However, the fact remains that most FCPA enforcement actions (that is enforcement actions that charge or find violations of the FCPA’s books and records and internal controls provisions) have nothing to do with foreign bribery. For lack of a better term, these enforcement actions have longed been called non-FCPA, FCPA enforcement actions by this site.

The latest example concerns Ideanomics (a Nevada corporation with principal executive offices in Beijing, China). Since, its inception in 2004, Ideanomics has engaged in a variety of business activities (video-on-demand services, petroleum trading, artificial intelligence, financial technology, and most recently assisting businesses and governments transition their fleets from gas to electric vehicles).

In summary fashion, this order finds:

“These proceedings involve multiple acts of accounting and disclosure fraud by Ideanomics, a publicly traded company, and its senior management. Beginning in at least 2017 and continuing through at least 2019, Ideanomics and its senior executives engaged in the following misconduct:

• Ideanomics issued a false and misleading press release on November 13, 2017, in which it provided $300 million revenue guidance for fiscal year 2017. At the time this press release was issued, there were numerous facts known to Company management indicating that the Company would not be able to meet this guidance.

• In December 2017 and March 2019, Ideanomics’s then-Chairman Bruno Wu was substantively involved in negotiating agreements between Ideanomics and Tiger Sports Media, Ltd. (“Tiger Sports”) and Beijing Financial Holdings, Ltd. (“Beijing Financial”), Hong Kong-based entities, relating to transactions that benefited Wu personally. 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. In fact, Wu exercised control over Tiger Sports and Beijing Financial and used cash and other assets from those companies for his personal benefit. In addition, Ideanomics overstated the value of assets acquired in connection with these agreements. As a result, Ideanomics did not disclose in public filings that Tiger Sports and Beijing Financial were related parties and improperly overstated the value of its investments.

• Ideanomics fraudulently and materially misstated the financial statements in its 2017 and 2018 Form 10-K filings, as well as its Form 10-Q filings for the first, second, and third quarters of 2018, by failing to impair the value of certain licensed video content that it valued at $17 million. Ideanomics supported the value of the video content with a nonbinding letter of intent to acquire the assets from a shell company. Ideanomics failed to record any impairment of the asset despite having recognized minimal revenue, if any, from the licensed content since 2015. Ideanomics’s misstatements resulted from the deliberate actions of Wu, as well as the failure of the Company’s then-CFO, Federico Tovar.

• Ideanomics materially misstated revenue in its 2018 Form 10-K, as well as its Form 10-Q filings for the first three quarters of 2018, by improperly accounting for oil transactions on a gross, rather than net, basis. Ideanomics improperly accounted for the transactions as a principal even though it purchased and sold the oil simultaneously and had little or no discretion over the purchase or sale prices. Ideanomics’s misstatements resulted from Tovar’s failure to understand Ideanomics’s oil trading business and the propriety of the oil trading accounting.

• Ideanomics materially misstated revenue in its financial statements for the first and second quarters of 2019 by improperly recognizing revenue totaling $40.7 million in a transaction with Counterparty A. Wu told Tovar the amount of profit to report in those quarters, an amount which eliminated the potential tax liability. Tovar knew, or should have known, that this approach was not consistent with U.S. GAAP. Additionally, CEO Alfred Poor certified the first and second quarter Form 10-Q filings even though he knew or should have known of problems related to the underlying assets received from Counterparty Athat would affect their value and the amount of Ideanomics’s reported revenue.

• Ideanomics falsely stated in its 2018 Form 10-K that its principal executive and principal financial officers, Poor and Tovar, had performed evaluations of the Company’s internal control over financial reporting (“ICFR”) even though the evaluation of ICFR was incomplete. Given their roles and responsibilities as CEO and CFO respectively, Poor and Tovar knew or should have known that these statements were false.

• Ideanomics’s Form 10-Q for the second quarter of 2019 was signed by Carla Zhou as interim CFO and attached to it were two SOX certifications that were purportedly signed by Zhou as interim CFO, which Poor facilitated. In fact, Zhou could not speak or read English and had not actually reviewed or signed the Form 10-Q or the certifications prior to the filing. Poor knew or should have known that the certifications purportedly signed by Zhou were inaccurate and that Zhou did not have a chance to review and approve of the Form 10-Q before it was filed.”

Based on the above, the order finds (among other things) that Ideanomics violated, and Poor and Tovar caused Ideanomics’s violations of the FCPA’s books and records and internal controls provisions.

Without admitting or denying the SEC’s findings, Ideanomics agreed to cease and desist from committing or causing any future violations and agreed to pay a $1.4 million civil penalty. Poor and Tovar likewise agreed to cease and desist from committing or causing any future violations and both agreed to pay a $75,000 civil penalty.

In summary fashion, this order finds:

“These proceedings involve multiple violations of the anti-fraud and disclosure provisions of the federal securities laws by Bruno Wu, former Chairman and CEO of Ideanomics, Inc. (“Ideanomics” or the “Company”). Beginning in at least 2017 and continuing through at least 2019, Respondent engaged in the following misconduct:

• Wu made false and misleading statements on November 13, 2017, in which he provided $300 million revenue guidance for Ideanomics’s fiscal year 2017. At the time this statement was made, there were numerous facts known to Wu indicating that the Company would not be able to meet this guidance.

• In December 2017 and March 2019, Wu was substantively involved in negotiating agreements between Ideanomics and Tiger Sports Media, Ltd. (“Tiger Sports”) and Beijing Financial Holdings, Ltd. (“Beijing Financial”), Hong Kong-based entities, relating to transactions that benefited Wu personally. Wu falsely told Company management that those entities were not related to him or his companies. As a result, Ideanomics did not disclose in public filings that Tiger Sports and Beijing Financial were related parties. In fact, Wu exercised control over Tiger Sports and Beijing Financial and used cash and other assets from those companies for his personal benefit.

• In March 2018, to avoid Ideanomics’s reporting an asset impairment, Wu arranged for Ideanomics’s auditor to receive a fraudulent letter of intent (“LOI”) from a third party that supposedly wanted to purchase Ideanomics’s nonexclusive rights to broadcast a catalog of video-on-demand entertainment titles (“Licensed Content”) in China. Wu also signed management representation letters that falsely stated that the prospective buyer was qualified to buy the Licensed Content, when in fact the prospective buyer was a shell company.

• Wu caused Ideanomics to materially misstate revenue in its financial statements for the first and second quarters of 2019 by improperly recognizing revenue totaling $40.7 million from a transaction with Counterparty A. Wu told Ideanomics’s then-CFO the amount of profit to report in those quarters, an amount which eliminated the potential tax liability.”

Based on the above, the order finds (among other things) that Wu caused violations of the FCPA’s books and records and internal controls provisions.

Without admitting or denying the SEC’s findings, Wu agreed to cease and desist from committing or causing any future violations and agreed to pay approximately $3.4 million in disgorgement and prejudgment interest as well as a $200,000 civil penalty.

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