ADMINISTRATIVE PROCEEDING
File No. 3-21932

May 8, 2024 – The Securities and Exchange Commission today announced settled charges against C-Bond Systems, Inc., a Texas-based company that sells window strengthening products, and its CEO and CFO, Scott Silverman, for improperly recognizing and reporting revenue for 2020.

According to the SEC’s order, C-Bond improperly recognized and reported approximately $102,000 in revenue for an order that never left the control of C-Bond and was never shipped to the customer. The SEC’s order finds that the product was shipped from C-Bond’s warehouse on December 29, 2020 with instructions for the shipping company to hold the product in its own warehouse until further notice; however, three months later, having never received payment for the product from the customer, C-Bond requested the shipping company return the product to C-Bond. According to the SEC’s Order, later in 2021, Silverman signed an annual report on Form 10-K and a registration statement on Form S-1 that reported the revenue from this proposed sale, which caused C-Bond to overstate total revenue for 2020 by more than 15%, showing a purported increase in revenue of more than 9% compared to the previous year. Without the revenue, C-Bond would have reported a decrease of almost 8% compared to the previous year. The SEC’s order also finds that, by the time Silverman signed these filings, he had received emails notifying him that the product had been returned to C-Bond. Accordingly, the order finds that Silverman knew or should have known that the revenue should not have been recognized or reported in accordance with Generally Accepted Accounting Principles, which require that the customer obtain control of the goods in order to recognize revenue. In April 2022, C-Bond filed an amended annual report signed by Silverman that reversed all revenue from this transaction.

The SEC’s order finds that C-Bond and Silverman violated or caused violations of the antifraud provisions of Section 17(a)(2) and (3) of the Securities Act of 1933, the reporting provisions of Section 13(a) of the Securities Exchange Act of 1934 and Rule 13a-1 thereunder, and the books and records and internal accounting controls provisions of Section 13(b)(2)(A) and Section 13(b)(2)(B) of the Exchange Act and 13a-15(a) thereunder. Without admitting or denying the SEC’s findings, C-Bond and Silverman consented to a cease-and-desist order and agreed to pay penalties of $175,000 and $50,000, respectively. Silverman also agreed, pursuant to Section 304 of the Sarbanes-Oxley Act, to reimburse C-Bond for a bonus of $21,961 in cash and 197 preferred shares of stock, which he had received during the time C-Bond’s financial statements were misstated.

The SEC’s investigation was conducted by Stephen LeBlanc, Malgorzata Spangenberg and Andrea Fox. The investigation was supervised by Lisa Deitch, Peter Rosario, and Stacy Bogert.