Kubient founder Paul Roberts pleads guilty to securities fraud, lied about company's AI tool, prosecutors say

A Long Island tech founder has pleaded guilty to securities fraud for defrauding investors and auditors by claiming more than $1.3 million in fraudulent revenue and making misrepresentations about the efficacy of an emerging artificial intelligence tool, federal prosecutors said Monday.

Paul Roberts, the founder and former chief executive and chairman of the board of directors of Kubient, Inc., a digital advertising technology company, was charged with one count of securities fraud.

An attorney for Roberts, 48, of Melville, could not be reached for comment Monday.

"Paul Roberts, the founder and former CEO of Kubient, inflated his company’s revenue and lied about the performance of one of its signature products, an AI-powered tool that was supposed to detect ad fraud in the digital advertising industry," said Damian Williams, the U.S. Attorney for the Southern District of New York, in a statement. "To carry out his scheme, Roberts had fake documents created to mislead the independent certified public accountants engaged to audit Kubient’s financial statements."

From about October 2019 to March 2021, Roberts allegedly executed "a scheme to defraud investors and auditors of Kubient," causing the company to "improperly recognize more than $1.3 million in fraudulent revenue" in its financial statements at the time of its initial public offering, and "made material misrepresentations about the efficacy of Kubient’s proprietary fraud detection tool, Kubient Artificial Intelligence," federal prosecutors said in a news release.

The $1.3 million in fraudulent revenue equaled over 94% of Kubient’s reported revenue for 2020 at the time of its initial public offering in or about August 2020, according to prosecutors who said Roberts made "material misrepresentations" to the U.S. Securities and Exchange Commission.

Roberts negotiated and executed three contracts between Kubient and another digital advertising technology company and one of its affiliates,  according to prosecutors.

Under the terms of two of the contracts, "Kubient agreed to use its proprietary fraud detection tool Kubient Artificial Intelligence (“KAI”) to scan data provided by Company-1 and the Company-1 Affiliate for instances of digital ad fraud and then deliver the results of KAI’s findings" to both, prosecutors said.

Company-1 agreed to sell Kubient other data and provide certain data-related services, but never provided the services, prosecutors said.

Roberts "directed Kubient employees to generate fake KAI reports and misled them about how he intended to use such reports," prosecutors said.

Kubient raised more than $12.5 million in its initial public offering around August 2020, resulting in its shares being publicly traded on the Nasdaq stock exchange, and more than $20 million in its secondary public offering around December 2020.

U.S. District Judge Jennifer L. Rochon is scheduled to sentence Roberts on Dec. 18.

By Nicole Fuller

nicole.fuller@newsday.com@NicoleFuller

Nicole Fuller is Newsday's senior criminal justice reporter. She began working at Newsday in 2012 and previously covered local government.