SEC charges App Annie and its founder with securities fraud
The Securities and Exchange Commission today announced that App Annie Inc., a leading alternative data provider for the mobile app industry, and its co-founder and former CEO and Chairman Bertrand Schmitt, have agreed to settle securities fraud charges for engaging in deceptive practices and making material misrepresentations about how App Annie's alternative data was derived. App Annie and Schmitt have agreed to pay more than $10 million to settle the matter, which is the SEC's first enforcement action charging an alternative data provider with securities fraud. According to the SEC's order, App Annie is one of the largest sellers of market data on mobile app performance, including estimates on the number of times a particular company's app is downloaded, how often it's used, and the amount of revenue the app generates for the company. The order finds that App Annie and Schmitt understood that companies would only share their confidential app performance data with App Annie if it promised not to disclose their data to third parties, and as a result App Annie and Schmitt assured companies that their data would be aggregated and anonymized before being used by a statistical model to generate estimates of app performance. The order further finds that App Annie and Schmitt misrepresented to their trading firm customers that App Annie generated the estimates in a way that was consistent with the consents it obtained from companies that shared their confidential data, and that App Annie had effective internal controls to prevent the misuse of confidential data and to ensure that it was in compliance with the federal securities laws. According to the SEC's order, App Annie and Schmitt were aware that trading firm customers were making investment decisions based on App Annie's estimates, and App Annie also shared ideas for how the trading firms could use the estimates to trade ahead of upcoming earnings announcements. Without admitting or denying the findings, App Annie and Schmitt consented to the entry of a cease-and-desist order under which App Annie is ordered to pay a penalty of $10 million, Schmitt is ordered to pay a penalty of $300,000, and Schmitt is prohibited from serving as an officer or director of a public company for three years.