Key Takeaways from SEC Fraud Charges Against the CEO, CFO, and Audit Committee Chair of Kubient
Earlier this month, the SEC brought accounting fraud charges in the U.S. District Court for the Southern District of New York against the CEO, CFO, and Audit Committee Chair of Kubient, a company that purported to use AI services to detect fraud in advertisements.[i] The charges focused on the CEO’s scheme to inflate the company’s […]
Jennifer Lee and Charles Riely are Partners, and Reanne Zheng is an Associate at Jenner & Block LLP. This post is based on their Jenner & Block memorandum.
Earlier this month, the SEC brought accounting fraud charges in the U.S. District Court for the Southern District of New York against the CEO, CFO, and Audit Committee Chair of Kubient, a company that purported to use AI services to detect fraud in advertisements.[i] The charges focused on the CEO’s scheme to inflate the company’s revenues in connection with its IPO and subsequent stock offering, and the concomitant failures by the CFO and Audit Committee Chair to investigate and report the CEO’s misconduct to the company’s outside auditors.
The SEC’s fraud charges against the CFO and Audit Committee Chair are significant. While recognizing that the accounting fraud scheme was “initiated” by the CEO, an SEC official noted in the agency’s accompanying press release that the case “should send an important signal to gatekeepers like CFOS and audit committee members that the SEC and the investing public expect responsible behavior when critical issues are brought to their attention.”[ii] This client alert analyzes the SEC’s case and provides key takeaways for officers and directors in the context of financial reporting issues.
