Jack Blount, the now-ex CEO of Intrusion, has settled with the SEC over allegations he made false and misleading statements about his infosec firm's product as well as his own background and experience.

In a complaint [PDF] filed Tuesday, America's financial watchdog charged Blount with breaking anti-fraud rules in the Securities Exchange Act plus sections of the Securities Act.

Per the settlement, which is still subject to court approval, Blount does not admit or deny the SEC's allegations. Nor does he have to pay any type of financial penalty, "based on Blount's inability to pay," but he has accepted "an officer and director bar" that will keep him out of the boardroom in the future.

The lawsuit against the executive follows an earlier SEC settlement with Texas-based Intrusion in September 2023.

According to the latest complaint, filed in a Texas federal court, Intrusion and Blount started promoting a new product called Intrusion Shield in May 2020. For the next 12 months, Intrusion and its chief executive allegedly made false and misleading statements about Blount's background, the product, and its purported customers - marketing claims all approved by Blount.

"Blount used his forceful, assertive style to tout his background and experience to promote Shield as a cybercrime prevention tool," the SEC claimed in court documents.

These statements, made in press releases, earnings calls, and interviews, included claims that Blount served as a director of five public companies and had a stint as chief information officer of the US Department of Agriculture. "Neither statement was true," according to the complaint.

While Blount did hold the title of director of the Information Technology Services Division within the National Finance Center, a subdivision of the USDA, he was not, as he allegedly claimed during an April 2021 radio interview, "a CIO in the federal government…fighting the Russians and Chinese for our entire federal government."

The ex-CEO also made similarly exaggerated statements about Intrusion's success converting Shield beta testers to paying customers, the settlement documents state.

First, of the 13 companies that participated in the Shield beta test, five allegedly had ties to Intrusion. These included Intrusion's PR firm, its securities-offering underwriter, a business whose CIO was Blount's son-in-law, an investment adviser who had a stake in the security shop, and a customer whose chairman was an Intrusion board member. 

Only six of the 13 beta testers ultimately purchased Shield, but that allegedly didn't stop Intrusion and Blount from talking up the product's success. 

In a Form 8-K, filed with the SEC in October 2020, Intrusion and Blount touted Shield's "early adoption by [a] Fortune 100 beta customer," when none existed. Plus, in a press release that was later attached to an SEC filing, the business claimed that "all of the companies" involved in the best testing "made the decision to move forward with Shield in production."

Following this 8-K filing, which was signed by Blount, "Intrusion's stock price closed at $23.88 per share on January 13, 2021, up more than 18.5 percent from the prior day's closing price and its trading volume increased more than 30 percent from the day before."

These - again, alleged - lies and overstatements continued throughout 2021, with Blount telling interviewers and investors that "Customer A" had installed Shield appliances across its global offices. The reality, according to the court documents, was that "Customer A's cyber defense officer was testing Shield at his residence on his home network." 

Additionally, Intrusion gave Customer A the product for free, and then Blount allegedly told the then-CFO not to disclose this to anyone, "I mean nobody."

After allegedly misrepresenting two more customers, called Customer B and Customer C in the court documents, Intrusion eventually terminated Blount in July 2021. ®

https://www.theregister.com//2024/05/01/sec_blount_settlement/