Contingencies

9 Months Ended

Sep. 30, 2024

Contingencies [Abstract]

Contingencies

14. Contingencies

The Company may be subject to reviews, inspections and investigations by regulatory authorities as well as legal proceedings arising in the ordinary course of business.

SEC ESG Settlement

On August 5, 2024, WTAM received a Wells Notice from the staff (the “Staff”) of the SEC advising WTAM that the Staff had made a preliminary determination to recommend that the SEC file an enforcement action against WTAM alleging violations of certain provisions of the U.S. federal securities laws relating to three exchange-traded series of WisdomTree Trust managed by WTAM that pursued ESG-focused strategies (collectively, the “Funds”). The Funds, which were launched in March 2020 and were liquidated in February 2024, collectively had monthly average cumulative assets under management of approximately $119 million throughout their lifetime as ESG-named funds.

Without admitting or denying the SEC’s allegations, WTAM agreed to resolve the matter by consenting to the entry of an Order by the SEC, which was announced publicly on October 21, 2024, in which WTAM agreed to cease and desist from committing or causing any violations and any future violations of Sections 206(2) and 206(4) of the Investment Advisers Act of 1940, as amended, Rules 206(4)-7 and 206(4)-8 thereunder, and Section 34(b) of the Investment Company Act of 1940, as amended, and to pay a civil money penalty of $4,000 (the “SEC ESG Settlement”). This amount has been reported in other losses, net on the Consolidated Statements of Operations during the three and nine months ended September 30, 2024.

Excluding the penalty, the Company expects that all legal and other related expenses incurred by WTAM in connection with the matter will be covered by insurance, less a $1,000 deductible. These expected covered expenses totaled $3,661 and $4,114, respectively, during the three and nine months ended September 30, 2024 and have been reported in other revenue on the Consolidated Statements of Operations.

Closure of the WisdomTree WTI Crude Oil 3x Daily Leveraged ETP

Between December 2020 and March 2022, WMAI, WTMAML, WTUK and/or WisdomTree Ireland Limited (“WT Ireland”) were served with seven separate writs of summons to appear before the Courts of Milan, Udine or Turin, Italy by investors seeking damages resulting from the closure of the WisdomTree WTI Crude Oil 3x Daily Leveraged ETP (“3OIL”) in March 2020. The product was dependent on the receipt of payments from a swap provider to satisfy payment obligations to the investors. Due to an extreme adverse move in oil futures relative to the oil futures’ closing price, the swap contract underlying 3OIL was terminated by the swap provider, which resulted in the compulsory redemption of 3OIL, all in accordance with the prospectus.

Since February 2022, five of the seven actions have been resolved in the Company’s favor, of which two are subject to appeal. Total damages sought by all investors related to the two remaining open and two appealed claims, including an appealed claim for total damages of €7,830 ($8,740), were approximately €19,130 ($21,360) at September 30, 2024.

Additionally, in July 2023, WT Ireland received a letter from counsel on behalf of additional investors seeking damages of up to approximately €8,350 ($9,320) resulting from the closure of 3OIL. The claim is in its preliminary stages and a writ of summons has not been served.

The Company continues to assess the open claims with its external counsel. The Company expects that losses, if any, arising from these claims will be covered under its insurance policies, less a $500 deductible. An accrual has not been made with respect to these matters at September 30, 2024 and December 31, 2023.