SEC Charges Diagnostic Imaging Company and its former CEO for misrepresenting the manufacturing costs of its flagship device.

The Securities and Exchange Commission (SEC) has brought charges against Nano-X Imaging Ltd., an Israel-based diagnostic imaging company, and its former CEO, Ran Poliakine, for negligently misrepresenting the manufacturing cost of the company’s flagship imaging device, the Nanox.ARC. Both Nanox and Poliakine have agreed to settle the charges laid out by the SEC.

According to the SEC’s complaint, spanning from August 2020 to May 2021, Nanox and Poliakine made claims that the Nanox.ARC, touted as a cost-effective alternative to existing X-ray devices, could be mass-produced for a unit cost ranging from $8,000 to $12,000. The SEC alleges that Poliakine disregarded higher cost estimates provided by company executives, including engineering executives, while promoting the lower manufacturing expenses. The complaint further asserts that Nanox incorporated this misleading cost estimate into reports submitted to the SEC before raising $165 million through an initial public offering. Subsequently, the company continued to include this estimate in subsequent financial filings, and Poliakine reiterated this figure during various earnings calls and media interviews.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Nanox with violating Section 17(a)(2) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934, along with Rules 12b-20 and 13a-1 thereunder. Poliakine is charged with violating Section 17(a)(2) of the Securities Act and aiding and abetting violations of Section 13(a) of the Exchange Act, as well as Rules 12b-20 and 13a-1 thereunder. Without admitting or denying the SEC’s allegations, Nanox and Poliakine have consented to a final judgment that includes permanent injunctions. The judgment also mandates that Nanox and Poliakine pay civil penalties of $650,000 and $150,000, respectively. In addition, Poliakine is required to disgorge $266,836.39, plus prejudgment interest. These settlements are subject to court approval.

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