CEO of AI Ad-Tech Firm Kubient Sentenced for Fraud in $1.3 Million Scheme

CEO of AI ad-tech firm pledging "world free of fraud" sentenced for fraud

In May 2024, the website of ad-tech firm Kubient touted that the company was "a perfect blend" of ad veterans and developers, "committed to solving the growing problem of fraud" in digital ads. Like many corporate sites, it also linked old blog posts from its home page, including a May 2022 post on "How to create a world free of fraud: Kubient's secret sauce." These days, Kubient's website cannot be reached, the team is no more, and CEO Paul Roberts is due to serve one year and one day in prison, having pled guilty Thursday to creating his own small world of fraud. Roberts, according to federal prosecutors, schemed to create $1.3 million in fraudulent revenue statements to bolster Kubient's initial public offering (IPO) and significantly oversold "KAI," Kubient's artificial intelligence tool. The core of the case is an I-pay-you, you-pay-me gambit that Roberts initiated with an unnamed "Company-1," according to prosecutors. Kubient and this firm would each bill the other for nearly identical amounts, with Kubient purportedly deploying KAI to find instances of ad fraud in the other company's ad spend. Roberts, prosecutors said, "directed Kubient employees to generate fake KAI reports based on made-up metrics and no underlying data at all." These fake reports helped sell the story to independent auditors and book the synthetic revenue in financial statements, according to Roberts' indictment. Before Kubient's IPO in August 2020, Kubient issued a prospectus noting research figures that suggested $42 billion lost to ad fraud in 2019. Kubient's technology was touted as fast enough to work in the 300-millisecond real-time ad auction window. It leveraged "machine learning powered [sic] pre-bid ad fraud prevention technology" and a "self-learning neural network always getting smarter." Revenues for the first quarter of 2020 were shown as $1.38 million, a huge jump from $177,635 in Q1 2019, thanks to "two enterprise customers" that "successfully beta tested KAI." Prosecutors noted at the time of Roberts' plea that he personally added language that Kubient was "identifying and preventing approximately 300% more digital ad fraud" than a client's current ad partners. Kubient raised more than $33 million during its initial and secondary equity offerings. Investigations by the Securities and Exchange Commission, US Postal Inspection Service, and the US Attorney's Office for the Southern District of New York led to charges against Roberts in September 2024. Joshua A. Weiss, Kubient's former chief financial officer, and Grainne M. Coen, a former audit committee chair, were also charged at the time. Roberts, 48, faced up to 20 years in prison on a single charge of securities fraud. He will be subject to one year of post-release supervision after serving his term. Kubient, which was reported to be in Chapter 7 liquidation proceedings at the time of Roberts' plea, was announced as merging with Adomni and taking on the Adomni name in May 2023.

AdTech CEO whose products detected ad fraud jailed for fraud

The former CEO of Kubient, an advertising tech company that developed a cloudy product capable of detecting fraudulent ads, has been jailed for fraud. CEO Paul Roberts was sent down on Thursday for a year and a day, for faking financial records after also faking a test of his company's software. As detailed by the office of the United States Attorney for the Southern District of New York, Roberts and an unnamed company conspired to provide $1.3 million worth of services to each other. The scheme saw Kubient promise to use its KAI fraud detection software to scan data provided by the unnamed company and an affiliate. The scan was billed as a test of KAI's powers. According to the Attorney's Office, Roberts "directed Kubient employees to generate fake KAI reports based on made-up metrics and no underlying data at all." Despite doing no work of value, Kubient charged the other company $1.3 million and then recognized that as revenue. Kubient also claimed to have paid the unnamed company $1.3 million for services. Both companies therefore ended up with a nice slug of extra revenue on their books. Which was useful to Kubient, because it had very little real revenue and hoped to go public. Roberts used the fake reports generated for the unnamed company to convince Kubient's auditors the $1.3 million of revenue was real. The company listed in 2020 and raised over $33 million after initial and secondary public offerings. The US Securities and Exchange Commission got wind of the situation and in 2024 filed charges against Roberts, plus Kubient's CFO and Audit Committee Chair who learned of the faked revenue before the secondary public offering and didn't inform investors. Roberts pled guilty and on Thursday was sentenced to jail, plus a year of supervised release. In May 2024 Kubient announed a plan to with an outfit called Adomni. The latter company said the deal would mean "Kubient's AI product KAI will be harnessed to deliver better advertising campaigns via Adomni's platforms. These include enhanced accuracy of fraud prevention via AI-powered algorithms, real-time data monitoring and analysis of incoming data, advanced pattern recognition within the data, brand protection from fraudulent media, and more." At this point, readers might think KAI was real and useful. But by November 2023, Kubient voluntarily delisted from the NASDAQ stock exchange. And in December 2024 it terminated [PDF] the merger agreement in December 2024. The company appears to have wound up. ®