Diversified holding company Ault Alliance agreed to pay $700,000 as part of a settlement with the Securities and Exchange Commission (SEC) addressing allegations of misleading disclosures and reporting violations.
The settlement pertains to material misstatements regarding certain businesses of Ault Alliance, failure to disclose interests in related-person transactions, improper recording of purported consulting services, erroneous accounting of investments, and failure to maintain accounting and disclosure controls, the SEC said in its order published Tuesday.
The agency also reached settlements with Milton Ault, the company’s executive chairman and former chief executive officer, and William Horne, the current CEO and former chief financial officer. Ault agreed to pay a penalty, disgorgement, and prejudgment interest totaling approximately $236,000, and Horne was fined $20,720.
The details: In 2018 and 2019, Ault Alliance made materially false and misleading statements concerning the performance of a $50 million purchase order it received from related party Avalanche International and regarding its new cryptocurrency asset mining business, according to the SEC. The company, from 2017 through the present, failed to maintain effective internal control over financial reporting (ICFR), leading to multiple restatements needing to be filed during the period, the agency added.
From fiscal years 2016-21, Ault Alliance failed to disclose material interests Ault and Horne had in loans made to a related person, and the company in 2019 improperly recorded $75,000 paid to an individual as being for consulting services when it was instead used to settle a personal debt Ault owed, the SEC continued.
The agency also alleged improper accounting at Ault Alliance regarding its investments in warrants of Avalanche during FYs 2018-21.
Compliance considerations: Ault Alliance received credit for restating its previous financial statements. In addition to paying the penalty, the company consented to an independent consultant to review its ICFR and disclosure controls and submit a written report within six months. Ault Alliance must implement all recommendations in the report.
Company response: “The company believes that this settlement is the right course of action for the company and continues to be committed to operating at the highest level of integrity, including with respect to its public filings and communications with investors,” said Ault Alliance in a statement.
Neither Ault Alliance, Ault, nor Horne admitted or denied the SEC’s findings.