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SEC Charges Exela Technologies, Former CFO for Reporting and Controls Failures

Dec. 19, 2022

File No. 3-21256

December 19, 2022 - The Securities and Exchange Commission today announced settled charges against Exela Technologies, Inc., an IT company headquartered in Irving, Texas, for reporting, controls, and recordkeeping violations. The SEC also announced settled charges against Exela's former Chief Financial Officer, James G. Reynolds, with causing Exela's reporting violations in one quarter relating to two related party transactions.

According to the SEC's order, from mid-2017 through 2019, Exela failed to properly account and report for liabilities it incurred when it was sued by minority shareholders who dissented from a 2017 merger and sought the fair value of their shares. While Exela had disclosed the shareholders' claim in its SEC filings while the suit was pending, Exela erroneously failed to accrue for any payment it would have to make to those dissenting shareholders. The order finds that Exela also failed to properly identify, account for and, in one quarter, disclose certain related party transactions with an entity that was controlled by Company leadership. According to the order, Reynolds caused Exela's failure to identify and disclose two of those transactions in one 2019 quarterly filing.

The SEC's order finds that Exela violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act and Rules 13a-1, 13a-13,13a-15(a) and 12b-20 thereunder, and that Reynolds caused Exela's violations of Section 13(a) of the Exchange Act and Rules 13a-13 and 12b-20 thereunder. Without admitting or denying the SEC's findings, Exela and Reynolds have agreed to cease-and-desist orders and to pay civil money penalties in the amounts of $175,000 and $10,000, respectively.

The SEC's investigation was conducted by Lesley Atkins and Natalie Lentz, and supervised by Jeff Leasure, Kristen Dieter, and Mark Cave.

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