A unit of JD.com (HKG:9618) has agreed to pay $500,000 to settle U.S. Securities and Exchange Commission charges that it engaged in "sham transactions" to inflate revenue, according to a cease-and-desist order issued Friday.
Dada Nexus, the on-demand delivery platform behind JD Daojia and Dada Now, consented to the order without admitting or denying the SEC's findings, the commission said.
The JD.com unit has to pay the penalty within 10 business days.
The SEC found that from October 2022 through September 2023, employees in Dada's advertising and marketing unit entered into sales and purchase contracts with customers and vendors in equal amounts.
"At least some of the relevant customers and vendors had undisclosed connections and earned commissions related to the relevant contracts, and no services were provided under the relevant contracts," the SEC said.
The commission noted that Dada's net revenues were overstated by 8.24% in the second quarter of 2023 and 9.34% in the third quarter of 2023. Operations and support costs were also inflated by 14.24% and 14.32% in those two quarters, respectively.
From October 2022 to September 2023, net revenues were inflated by about 568 million yuan and costs by roughly 576 million yuan, the order said.
Without the transactions, Dada's revenue would have missed its guidance by about 7% in the second quarter of 2023 and 6% in the third quarter of that year.
Dada discovered the scheme during a routine internal audit in November 2023 and conducted an independent review. After disclosing the findings in January 2024, Dada's ADSs plummeted 43%.
Dada Nexus did not immediately respond to' request for comment.
