FTE Networks Inc is a holding and investment company specializing in
real estate investments. On July 15, 2021, the SEC charged the
former CEO and CFO of FTE Networks Inc. with conducting a multi-
year accounting fraud (SEC, 2021). The fraud included inflating
company revenues, hiding the company’s issuance of convertible
notes, and misappropriation of company funds for personal use. The
fraud allegedly occurred between 2016 through 2019 and involved
millions of dollars. The fraud was discovered by FTE in 2019 in which
it had to file restated financial statements.
The CEO and CFO were able to inflate revenues by recording
revenue and accounts receivable for construction projects that were
not started (Hamilton, 2021). This is an example of accelerated
revenue recognition. The CEO and CFO used the accelerated revenue
recognition to meet earnings projections and hide their theft from the
company. The restated financials for 2016 included a reduction in
revenues of 108% (Hamilton, 2021). The CEO and CFO also
improperly recorded the assets and liabilities of the company. FTE
received loans that were backed by securities but did not reveal this
on their on financial statements.
References
Hamilton, B. (2021, July 15). SEC charges former CEO and CFO of FTE
Networks, Inc with Accounting Fraud. Hamilton & Associates Law
Group, P.A. Retrieved September 24, 2022, from
https://www.securitieslawyer101.com/2021/sec-charges-former-
ceo-and-cfo-of-fte-networks-inc-with-accounting-fraud/
SEC. (2021, July 15). SEC Charges Executives of Network Infrastructure
Company With Accounting Fraud. SEC . Retrieved September 24,
2022, from https://www.sec.gov/news/press-release/2021-127
