Dada Nexus, a subsidiary of JD.com, agreed to a $500,000 settlement with the U.S. Securities and Exchange Commission (SEC). The agreement resolves claims that the company used fraudulent advertising deals to inflate financial results.
The SEC found that Dada engaged in sham transactions to meet revenue targets between October 2022 and September 2023. These practices overstated net revenue and operational expenses by more than $160 million.
The transactions caused Dada to overstate its net revenue by 8% in the second quarter of 2023. The company also overstated third-quarter net revenue by 9%.
An internal audit first uncovered the practices, leading to a public disclosure in January 2024. Dada shares plummeted by approximately 46% following the announcement.
The SEC set the penalty after considering the company's cooperation and efforts to improve internal controls.