The Securities and Exchange Commission today announced settled accounting fraud charges against Cloopen Group Holding Limited, a China-based provider of cloud communications products and services whose American depositary shares formerly traded on the New York Stock Exchange. The SEC determined not to impose civil penalties against Cloopen because the company self-reported its accounting issues, cooperated extensively with the staff’s investigation, and undertook prompt remedial measures.
According to the SEC’s order, two senior managers who led Cloopen’s strategic customer contracts and key accounts department orchestrated a fraudulent scheme from May 2021 through February 2022 to prematurely recognize revenue on service contracts. The order finds that, facing pressure to meet strict quarterly sales targets, the two senior managers directed their employees to improperly recognize revenue on numerous contracts for which Cloopen had either not completed work or, in some instances, not even started work. As a result of this misconduct and other accounting errors, Cloopen overstated its unaudited financial results for the second and third quarters of 2021 and its announced revenue guidance for the fourth quarter of 2021.
Source: SEC.gov | SEC Charges China-Based Tech Company Cloopen Group with Accounting Fraud