SEC Charges Former Pareteum Executives With Engaging in Fraudulent Revenue Recognition Practices

The Securities and Exchange Commission (SEC) has announced charges against the former Chief Financial Officer, Edward O’Donnell, and the former Chief Commercial Officer, Victor Bozzo, of New York-based telecommunications company Pareteum Corp. for allegedly engaging in a fraudulent revenue recognition scheme that artificially inflated the company's reported revenues in its financial statements. The SEC also charged the company's former Controller, Stanley Stefanski, for his role in the scheme in a separate administrative proceeding. According to the SEC’s complaint, Bozzo, O'Donnell, and Stefanski engaged in a fraudulent scheme between 2018 and 2019 to recognize revenue from non-binding purchase orders for SIM card services for customers, despite knowing that the customers had not committed to paying for the services until they sold them to downstream consumers. As a result of this scheme, the SEC alleges that Pareteum overstated its revenue by $12 million for fiscal year 2018 and by $27 million for the first and second quarters of 2019 combined. The SEC has brought civil charges against Bozzo and O’Donnell and has sought injunctive relief, disgorgement and prejudgment interest, civil penalties, and officer and director bars against them. Stefanski has agreed to cease and desist from violations and will be subject to future proceedings to determine any monetary relief. The U.S. Attorney's Office for the Southern District of New York has also announced criminal charges against Bozzo and O’Donnell.