Jumio, Inc., SEC Imposes Sanctions on Former CFO | Goodman & Nekvasil P.A. May Recover Investor Losses
Securities and Exchange Commission Imposes Sanctions on Former CFO of Jumio, Inc.
ACCORDING TO THE SEC: This matter involves Respondent Chad Starkey’s negligence in connection with a fraudulent scheme to provide false financial information to prospective investors in Jumio, Inc., a private, mobile payments start-up company, in order to convince those investors to purchase shares from Jumio employees – including Jumio’s senior executives – in a private, secondary market transaction. The scheme was carried out by Jumio’s founder and former Chief Executive Officer, Daniel Mattes, who overstated Jumio’s revenues by more than $90 million by including revenue that Jumio did not earn, causing Jumio to enter into a round-trip transaction that had no economic substance, and causing Jumio to recognize revenue sooner than it should have under Generally Accepted Accounting Principles (“GAAP”). From March 2014 through February 2015, Mattes used the false financial statements to sell Jumio shares owned by Jumio employees – including Mattes – to investors in the private market.
ACCORDING TO THE SEC: Starkey, Jumio’s former Chief Financial Officer, accepted Mattes’ inclusion of the roundtrip revenue in Jumio’s financial statements, even though he knew or should have known that it was not appropriate. Starkey also accepted Mattes’ practice of immediately recognizing as revenue the full amount of possible revenue under certain contracts, regardless of whether the services had been rendered or collectability of any amounts due, even though he knew, or should have known, that this did not comply with GAAP. Starkey also knew Mattes was putting the false financial statements into an electronic data room for prospective investors to review before they purchased Jumio shares, and signed stock purchase agreements that falsely represented that Jumio had waived its refusal rights over the shares (which enabled the shares to be sold to private market investors). Starkey sold some of his own shares in Jumio during this period, profiting $364,000. Jumio ultimately filed for bankruptcy in 2016, and all the shares bought by the secondary market purchasers became worthless.
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