Sec Cryptocurrency SEC Charges GTT Communications for Disclosure Failures

The Securities and Exchange Commission today charged GTT Communications, Inc. with failing to disclose material information about unsupported adjustments the company made in several Commission filings, which increased GTT’s reported operating income by at least 15 percent in three quarters from 2019 through 2020. The SEC’s order credits GTT with promptly self-reporting, undertaking affirmative remedial measures, and providing substantial cooperation to the SEC, and does not order a civil penalty against GTT.

According to the SEC’s order, after experiencing rapid growth through a series of acquisitions beginning in 2017, GTT struggled to reconcile data that was being generated by two of the company’s key operational systems. Over time, the two systems began to show a persistent discrepancy between actual expenses, as reflected in invoices received from vendors, and the company’s expected expenses. GTT was unable to reconcile these two systems and knew that it lacked sufficient information necessary to accurately record and report certain expenses. The SEC’s order finds that GTT nonetheless made unsupported adjustments of more than $35 million that lowered its reported cost-of-revenue, thereby increasing its reported operating income, but failed to disclose material facts about these adjustments.

In December 2020, GTT disclosed that certain previously issued consolidated financial statements should no longer be relied upon and that it had commenced an internal investigation. After discovering the issues concerning costs, GTT attempted to remediate its accounting and financial reporting issues and promptly self-reported to the SEC the matters that were subject to its ongoing internal investigation. It also cooperated extensively with the SEC staff during its investigation.

“At a time when it was still evaluating the nature and impact of the accounting issues it had identified, GTT self-reported to the SEC and followed up by providing substantial cooperation throughout our investigation while taking significant steps to address the shortcomings in its processes,” said Mark Cave, Associate Director of the Division of Enforcement. “The SEC recognized GTT’s timely self-report, cooperation, and remediation in its decision not to impose a monetary penalty on the company.”

The SEC’s order finds that GTT violated antifraud provisions of the Securities Act of 1933 as well as certain reporting, record-keeping, and internal control provisions of the federal securities laws. Without admitting or denying the SEC’s findings, GTT agreed to cease and desist from further violations of the securities laws.

The SEC’s investigation was conducted by Jennifer Brannan, Eric Hubbs, Daniel Sachs, and Devon Staren and supervised by Jeffrey Weiss and Mr. Cave.