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August 3, 2019

Stockholder files class action lawsuit against Shane McMahon's Ideanomics

Ideanomics, the often evolving financial technology company promising a $400 million investment in West Hartford, is facing a shareholder class action lawsuit alleging that it made false and misleading statements that led to artificial inflation of the company’s stock value. Shane McMahon is the Executive Vice-Chairman of the company.

Ideanomics is a New York-based company that also operates in China that focuses on financial technology services. The company has been in flux for several years. In the past year and a half, Ideanomics has seen numerous shifts in leadership, with three different CEOs and two different chairmen. In the past three years, the company has also operated under three different names.

In 2018, the company — then known as Seven Stars Cloud Group and before that Wecast Network, Inc. — paid $5.2 million for the former UConn campus in West Hartford. It planned to build a global headquarters called “Chain Valley" because it would emphasize artificial intelligence and blockchain technology.
The company later changed the name of the campus to “Fintech Village.”
When it announced plans for the development last year, Ideanomics promised “one of the world’s most impressive technology and innovation hubs" for West Hartford. The state of Connecticut agreed to a $10 million loan in return for the creation of hundreds of jobs.
The company revealed the much-anticipated design plans for the $400 million project on Monday, three days after the federal lawsuit was filed. At that time, the company had not yet filed any design plans with the town and had not released the exact size of the campus, although the renderings depict a sizeable development.
Maria José Pinto Claro da Fonseca Miranda, an Ideanomics stockholder, filed the suit on July 19 in the United States District Court for the Southern District of New York, on behalf of everyone who owned stock in the company from mid-May 2017 to mid-November 2018.
The suit names as defendants not only Ideanomics, but a number of current and former company leaders, including current Chairman Bruno Wu.
Ideanomics CEO and President Alf Poor, who became the company’s CEO after the period listed in the lawsuit and was not named in the suit, declined to comment on the matter.
Ideanomics Chairman Bruno Wu and his team revealed their design proposal for Fintech Village on Monday. (Brad Horrigan / Hartford Courant)
The lawsuit states that, while Ideanomics portrays itself as a financial technology company, in actuality the company’s “purported business activities have varied widely and changed with some frequency.”
For example, the suit says, Ideanomics in October 2017 took control of a Singapore-based oil trading company.
But the suit’s primary complaint is that Ideanomics withheld relevant and negative facts about its financial state. These omissions led to artificially high stock prices, the suit says, and were “committed willfully or with reckless disregard for the truth.”
Specifically, the suit says that the company repeatedly released statements of its revenues, which had increased up to 2,512 percent over the same time period the year before.
However, the company did not simultaneously disclose that, while revenues were up, the company was on track to produce lower-than-anticipated profits, the suit says. This was in large part because of the cost of constructing a U.S. headquarters, coupled with the narrow margins of Ideanomics’ oil trading and consumer electronics businesses.
Ideanomics CEO Alf Poor spoke at the company's design reveal on Monday. (Brad Horrigan / Hartford Courant)
Finally, in November 2018, the company issued a press release disclosing that the costs of building the U.S.-based team “have put a strain on our bottom line performance,” according to a portion of the release quoted in the lawsuit.
“As a result of these factors, we do not anticipate meeting our (earnings) guidance of $35 million for fiscal year 2018,” the release says.
The day the press release was issued, Ideanomics’ share prices fell 48.77 percent, the suit says, from $3.26 to $1.67.
The suit says that there are likely “hundreds" of stockholders who could be represented by the class action suit, although the exact number is not known.
Emily Brindley can be reached at ebrindley@courant.com.


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