SEC charges tech execs with $1.3M fraud, lying to auditors

The Securities and Exchange Commission charged two former executives and the former audit committee chair of technology company Kubient with fraud and lying to auditors.

The commission alleges the company's former chair, CEO and president Paul Roberts, former chief financial officer Joshua Weiss, and former audit committee chair Grainne Coen were involved in a scheme in which Kubient overstated and misrepresented its revenue in connection with two public stock offerings.

According to the SEC's complaint against Roberts, he fabricated reports that Kubient had successfully tested a flagship artificial intelligence program that detects real-time fraud during digital advertising auctions, inflating the company's 2020 revenue by more than $1.3 million — nearly all of its revenue leading up to the IPO. 

In a separate complaint against Weiss and Coen, the SEC alleges that the two learned, during the company's secondary stock offering, that the tests on the AI product had not been performed, but instead of investigating, they perpetuated the scheme by lying to Kubient's independent auditor about the company's revenue.

As a result, Kubient raised more than $33 million across two stock offerings, according to the complaints. 

"As alleged, this was a deliberate scheme by a public company CEO to concoct phony revenue, perpetuated by the failure of the company's CFO and independent audit committee chair to act appropriately when they learned of concerns about that revenue," Jason Burt, director of the SEC's Denver Regional Office, said in a statement. "This 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."

The SEC's complaints were filed in the U.S. District Court for the Southern District of New York. They charge Roberts, Weiss and Coen with violating the antifraud and other provisions of the federal securities laws and lying to auditors. The complaints seek injunctions, officer-and-director bars, disgorgement of ill-gotten gains, civil penalties and other reliefs against each of the defendants. 

Roberts consented in a partial settlement to injunctions from future violations of the charged provisions and agreed to litigate the appropriate remedies. His settlement is subject to court approval. Roberts, Weiss and Coen did not immediately respond to requests for comment. 

In a related case, the U.S. Attorney's Office for the Southern District of New York announced charges against Roberts. Roberts pleaded guilty to these charges and is scheduled to be sentenced on Dec. 18, 2024.