Intrusion Inc.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25854 / September 26, 2023
Securities and Exchange Commission v. Intrusion Inc., No. 4:23-cv-00859 (E.D. Tex. filed September 26, 2023)
SEC Charges Dallas Area Cybersecurity Company with Fraud
The Securities and Exchange Commission today filed a complaint against Intrusion Inc. ("Intrusion") for making false and misleading statements in 2020 and 2021, primarily through its former CEO, regarding the company's purported success in marketing a cybersecurity product, the terms of multiple contracts, and the background and experience of its former CEO. Intrusion has agreed to settle the SEC's charges.
The SEC's complaint alleges that from May 2020 through May 2021, Intrusion made materially false and misleading statements in press releases, earnings calls, interviews, and other public statements. As alleged in the complaint, Intrusion overstated its success in marketing Intrusion Shield, a new cybersecurity product, by falsely representing that most or nearly all beta-testing participants had converted to paying customers, when in fact less than half of such participants became paying customers. In addition, the SEC alleges that Intrusion misled investors about three customer relationships by omitting material information about the economic terms of one contract, prematurely claiming that a second contract had been executed, and falsely claiming that a third customer had signed a contract when it had not. Finally, the complaint alleges that Intrusion made misleading statements about the qualifications, experience, and accomplishments of its former CEO.
The SEC's complaint, filed in U.S. District Court for the Eastern District of Texas, charges Intrusion with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933, and the current reporting and disclosure controls and procedures provisions of Section 13(a) of the Exchange Act and Rules 13a-11 and 13a-15(a) thereunder. The SEC seeks permanent injunctions against Intrusion. Without admitting or denying the SEC's allegations, Intrusion has agreed to settle the matter by consenting to the entry of a final judgment that addresses all charges and relief sought by the SEC. The settlement is subject to court approval.
The SEC's investigation was conducted by staff of the SEC's Fort Worth Regional Office, including Melvin Warren, and supervised by Nikolay V. Vydashenko and Eric R. Werner. The SEC's litigation is being conducted by Jason Rose and supervised by B. David Fraser. The investigation is ongoing.