The former CEO and co-founder of the artificial intelligence-powered advertising software platform Alfi, Paul Pereira, is facing a lawsuit from the Securities and Exchange Commission (SEC) for fraud.
According to the regulator, Pereira is accused of making false and deceptive statements regarding Alfi’s financial performance. He allegedly went as far as creating a fake account on a social platform for traders to artificially inflate the company’s stock price, which eventually led to the company’s bankruptcy.
In response to these allegations, Pereira denied the claims, stating to Accounting Today, “All I have to say is it’s not true. I can tell you it’s certainly not true.”
The SEC filed the lawsuit on Tuesday in the U.S. District Court for the Southern District of Florida, seeking a permanent injunction, an officer-and-director bar, and a civil penalty against Pereira for violating antifraud provisions.
Pereira, 62, co-founded Alfi, originally known as Lectrefy, in April 2018. He served as the CEO and a board member of the Miami Beach, Florida-based company for four years before resigning in February 2022.
Alfi’s core objective was to leverage artificial intelligence and data analytics to gauge and forecast human reactions to advertisements. Despite its heavy reliance on advertising inventory for revenue, the company had not generated any revenue by November 2020 and was facing financial difficulties. This situation prompted Alfi to go public in May 2021, raising nearly $18 million.
The company quickly gained notoriety as a “meme stock,” a term used for stocks that experienced significant price fluctuations due to social media hype among retail investors. Pereira was allegedly focused on enhancing Alfi’s online visibility, as per the SEC’s complaint.
The SEC alleges that Pereira used an anonymous Stocktwits account under the pseudonym “Uptix12” to disseminate false and misleading information, such as exaggerating revenue figures. Despite claiming substantial revenue, the company only reported $17,000 in actual revenue.
Moreover, Pereira allegedly falsely claimed in a YouTube interview that Alfi was securing a contract with a prominent restaurant chain founder to implement its technology in the restaurants, a contract that, according to the SEC, was never in discussion.
The complaint also asserts that Pereira made several deceptive statements on social media and in official press releases, including overstating the company’s advertising inventory projections. While Pereira claimed the inventory would reach over \(100 million by the end of 2021 and \)500 million by the end of 2022, the actual inventory was less than $5 million at the time. Alfi eventually filed for bankruptcy in October 2022.
Eric Bustillo, the director of the SEC’s Miami Regional Office, emphasized the importance of holding public company officers accountable for their transparency and disclosure obligations to investors. He stated, “As alleged in our complaint, Pereira tried to boost the company’s stock price through his false and misleading statements.”
The SEC’s actions underscore its dedication to upholding the integrity of financial markets and ensuring that executives fulfill their legal responsibilities to provide accurate and transparent information to investors.
