Digital video subscription service Gaia will pay a $2 million fine to the Securities and Exchange Commission (SEC) for allegedly overstating its paid subscribers and retaliating against an internal whistleblower.

The details: In April 2019, Colorado-based Gaia reported in an SEC filing and in an earnings call it met its first-quarter objective by having 562,000 paying subscribers but neglected to mention 15,000 subscriptions were free trials and another 4,500 represented subscribers whose credit card payments had been declined, according to the SEC.

Gaia allegedly terminated an employee who blew the whistle on the company’s overstatement of its total paid subscribers, both internally to company executives and to the SEC. Gaia told the employee via email the complaint was “’unfounded’” and that the whistleblower was being fired “’for cause,’” as the investigation into the allegation “’required a significant expenditure of company resources to fully investigate,’” according to the SEC’s administrative proceeding published Tuesday.

The SEC does not disclose information about whistleblowers, other than anonymized award amounts.

Gaia also entered into severance agreements with 23 employees stipulating they consented to “forgo any monetary recovery in connection with providing information to the commission,” the SEC found. Such a provision violates the whistleblower protections contained in the Dodd-Frank Act, which forbids companies from impeding whistleblowers’ ability to communicate directly with the SEC and potentially receive an award, the agency said.

Gaia agreed to cease and desist from future violations and take certain measures to improve its response to whistleblower complaints. Paul Tarell Jr., the company’s chief financial officer, paid a $50,000 fine for allegedly causing Gaia’s overstatement.

Compliance considerations: Gaia cooperated with the investigation into the overstatement and retaliation allegation, the SEC said. The company agreed to change the wording in its severance agreements to make it clear former employees were not signing away their rights to receive a whistleblower award from the SEC.

The company also agreed to contact former employees who signed the previous severance agreement and provide them with an internet link to the SEC’s order, as well as a statement the company does not prevent them from pursuing a whistleblower award from the agency. Gaia must certify in writing it complied with the order’s provisions.

Gaia did not respond to a request for comment. The company and Tarell neither admitted nor denied the SEC’s findings.