Following a fraud accusation by a short firm and potential probe by the US Securities Exchange Commission (SEC), Nikola founder Trevor Milton is stepping down as executive chairman. “Nikola is truly in my blood and always will be, and the focus should be on the Company and its world-changing mission, not me,” Milton said in a statement (via the Financial Times). “So I made the difficult decision to approach the Board and volunteer to step aside as Executive Chairman.”

Former vice-chairman of General Motors and Nikola board member Stephen Girsky will take his place, the company said. GM recently sealed a billion-dollar deal with Nikola to supply it with batteries, fuel cells and other parts. GM will also build the “Badger” hydrogen-powered pickup truck for Nikola.

Come the middle of October, however, the SEC had intervened, obtaining a temporary restraining order against the company. The agency said Telegram didn’t register the offering with its office, and since it sees Grams as securities, it accused the company of violating the Securities Act of 1933. Then, in March, the US District Court for the Southern District of New York issued a preliminary injunction barring the delivery of Grams. And now the SEC has issued its final judgement.

“New and innovative businesses are welcome to participate in our capital markets but they cannot do so in violation of the registration requirements of the federal securities laws,” said Kristina Littman, chief of the SEC enforcement division’s cyber unit. “This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.” Telegram, meanwhile, accepted the penalty without admitting or denying any wrongdoing.

It’s not clear yet whether Telegram will revisit its Gram initiative in the future — if it does it will certainly do so under the watchful eye of the SEC — but the episode is illustrative of the wider problems companies face in getting cryptocurrency off the ground. Messaging service Kik was also ruled to have run its “Kin” token sale without proper regard for securities laws, while Facebook’s currency Libra has faced intense scrutiny from officials, leading to ongoing delays in launch.

 

Palo Alto terminated Nellore earlier in 2019, and he was apparently bent on fleeing. He booked a one-way flight to India shortly after the FBI interviewed him in May, and he was arrested at the airport. All of the group faces fraud charges from the SEC, while Nellore and one of his friends, Sivannarayana Barama, also face federal criminal charges.

The case illustrates a common risk in digital security. A company’s data is only safe if those who oversee it are trustworthy or have only limited access to that information. At the same time, technology may have been key to the charges. The SEC said the case came about thanks to “enhanced data analysis tools” that spotted the suspicious trading. In previous years, the activity might have gone unnoticed.

The settlement leaves Ericsson largely free of criminal convictions that could have led to sanctions and other stiff penalties, although its Egyptian branch pleaded guilty to violating the FCPA. It’s paying about $520.6 million to the DOJ, while the remaining $539.9 million goes to the SEC. For contrast, companies like HP have paid ‘just’ tens of millions to settle smaller bribery charges.

Ericsson chief Borje Ekholm (who took the role in January 2017) told the media that he considered the corruption “completely unacceptable,” pointing out that some of those involved were executives. The company also said it had taken steps to improve both its ethics and its monitoring.

The deal likely won’t make everyone happy. Ericsson’s behavior went on for the better part of two decades, but the company will largely be off the hook — the company said it could handle the settlement with “available funds.” Still, the payout is significant enough that it might give other tech firms pause if their anti-corruption policies are lax.

The agency says Telegram didn’t register the offering with its office, and since it sees Grams as securities, it’s accusing the company of violating the Securities Act of 1933. It’s not clear how this restraining order would affect Gram’s launch as a whole. Former SEC attorney Zachary Fallon told Bloomberg that it could also complicate the company’s ability to sell tokens in other countries. But even if it doesn’t prevent Telegram from launching outside the US, it could still cause huge issues for the company. The New York Times reported back in August that Telegram promised investors it would deliver Grams by October 31st or return their money.

The SEC Division of Enforcement’s Co-Director Stephanie Avakian said:

“Our emergency action today is intended to prevent Telegram from flooding the US markets with digital tokens that we allege were unlawfully sold. We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”

The agency also stressed that companies can’t avoid federal securities laws just by labeling their products a cryptocurrency or a digital token.

Block.one has agreed to pay the fine, but has neither admitted nor denied the SEC’s findings. The company has also been granted a waiver which means it won’t be subject to any ongoing restrictions that would usually apply to a settlement of this kind. It’s not the first such penalty to be levied by the SEC, however. Earlier this year it announced it was suing messaging service Kik for failing to register its ICO — part of its ongoing investigation into the way cryptocurrency companies conduct their fundraising activities.

The deal has Comscore and Matta pay respective penalties of $5 million and $700,000, while Matta will also pay another $2.1 million to reflect profits he made from selling company stock and other compensation. The executive is also banned from serving as the director or officer of a public company for the next 10 years. Neither party, however, is required to admit guilt.

Comscore stressed that it was under new leadership and had new internal procedures to prevent this from happening again. All the same, the settlement could spark uncertainty among many — however irrational it might be. If Comscore couldn’t be trusted to report its own finances properly, how do advertisers know the data they got was on the level? The same goes for market share estimates and other studies. It’s unlikely that the data was tainted, but ad teams might be shy about relying on Comscore in the future out of an abundance of caution.

The SEC also determined that Microsoft’s Saudi Arabian and Thai subsidiaries offered “improper travel and gifts” (read: more bribes) to officials and staff at non-government customers. The Turkish unit provided an “excessive discount” to a third party without any signs of services being offered, although US regulators stopped short of alleging bribery.

In a message to staff, Microsoft president Brad Smith said the company fired the offending employees over three years ago and severed relations with four resellers. It accordingly improved its anti-corruption efforts, including transparency for public sector discounts and using AI to flag potentially illegal sales. The company had to put up a fight, though — it faced lawsuits from resellers upset at the lost business. Microsoft eventually prevaliled, though, and said it was important to “cut all ties” with any company involved in the behavior.

This isn’t the first time a huge American tech company has been involved in European bribery allegations. HP staff were accused in 2012 of bribing Russian officials to land a computer contract. It’s still a relatively rare incident, though, and a headache for a company that was supposed to have left its legal troubles in the past.

The green light required revisions before the LTE could receive the SEC’s blessing. Companies on the LTSE will be allowed to list stock on other exchanges.

A number of companies have signaled their intent to list on the exchange when it goes live, although LTSE creator Eric Ries has declined to name them. If there’s enough uptake, though, the platform could influence how the tech world goes public. Many companies wait a decade or more (including Uber) before filing for an IPO, by which point their most dramatic growth is likely over. The LTSE could shorten that period and give tech companies both the money and time they need to bring their ideas to fruition. While this could lead to some high-risk companies going public, it could also help with promising concepts that would otherwise have to lean on private backers to stand a chance.