Former Kubient CEO Sentenced to Prison for Accounting Fraud
A former executive of digital advertising technology company Kubient, Inc. has been sentenced to one year and one day in prison for his role in an accounting fraud scheme. Paul Roberts, the company's founder, former CEO, and former chairman of the board, was convicted of securities fraud after admitting to misleading investors and auditors about the company’s financial performance and the capabilities of its proprietary fraud detection tool, Kubient Artificial Intelligence (KAI). U.S. District Judge Jennifer L. Rochon handed down the sentence in a federal court in New York.
According to court filings, between October 2019 and March 2021, Roberts orchestrated a scheme in which Kubient improperly recorded over $1.3 million in fraudulent revenue—accounting for more than 94% of its reported revenue in 2020. This misrepresentation occurred during the company’s initial public offering (IPO) in August 2020 and contributed to a distorted picture of its financial health.
At the center of the scheme was a $1.3 million transaction between Kubient and another digital advertising firm. The two companies had agreed to exchange services for nearly identical fees, with Kubient promising to use its KAI tool to detect fraudulent digital advertising activity. However, neither company actually provided the services, despite both making payments to one another. Kubient then recognized this transaction as legitimate revenue.
To conceal the fraudulent activity, Roberts reportedly directed employees to fabricate KAI performance reports using fictitious data, misleading auditors into believing that the company had met its contractual obligations. These misrepresentations appeared in Kubient’s U.S. Securities and Exchange Commission (SEC) filings and investor communications, falsely portraying KAI as an effective fraud detection tool.
Kubient went on to raise over $12.5 million in its IPO and an additional $20 million in a secondary public offering in December 2020. However, the company has since filed for Chapter 7 bankruptcy.
In addition to the prison sentence, Roberts, 48, of Melville, New York, will serve one year of supervised release. The case was prosecuted by the U.S. Attorney’s Office for the Southern District of New York, with assistance from the U.S. Postal Inspection Service and the SEC, which has filed a civil action against Roberts.