Super Micro Computer (NASDAQ:SMCI), a major player in the artificial intelligence server industry, is under investigation by the U.S. Department of Justice, according to a report from The Wall Street Journal (WSJ).
The investigation comes on the heels of a report by short-selling firm Hindenburg Research that raised concerns about the company’s accounting practices, the Wall Street Journal reported, citing people familiar with the matter.
The Wall Street Journal said the investigation is still in its early stages, with a prosecutor from the US Attorney’s Office in San Francisco reportedly seeking information related to the case.
The investigation appears to be linked to a lawsuit filed in April by Bob Long, a former employee, who accused Super Micro of accounting violations.
According to the Wall Street Journal, Long’s lawsuit alleges that the company improperly recognized revenue from 2020 to 2022, including booking unfinished sales and shipping unfinished equipment to customers.
Shares of Supermicro, known for making servers using Nvidia’s (NASDAQ:NVDA) generative AI chips, soared during the AI boom but have since fallen after peaking at $66 billion earlier this year, according to a Wall Street Journal report.
Following the WSJ report, SMCI shares fell about 12% on Thursday.
In its August report, Hindenburg also highlighted transactions between Super Micro and companies owned by the family of CEO Charles Liang, as well as allegations of shipments to Russian companies in violation of U.S. sanctions.
The day after the report, Super Micro announced that it would postpone filing its annual report and formed a board committee to review internal controls.
In a letter to clients on Sept. 3, Liang defended the company, calling the claims in the short seller’s report “false or inaccurate,” according to the Wall Street Journal. Meanwhile, Super Micro has asked that Long’s lawsuit be moved to arbitration, and a court hearing is scheduled for soon.
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