One of those suppliers, responsible for generating nearly half of such voluntary carbon units (VCUs) purchased (the Supplier), profited by sending data collected through its projects in rural Africa and Southeast Asia to third-parties who would validate the resulting reduction of carbon emissions and issue verified VCUs back to the Supplier. Corporations would then voluntarily purchase VCUs from the Supplier to offset their own pollution and meet their sustainable development goals.
Recently, an investigation from the U.S. DOJ found that from 2021 to 2023, the Supplier systematically misrepresented and falsified data about the progression of its projects – the replacement and installation of energy-efficient lightbulbs and cookstoves – to investors and third-party issuers of VCUs in order to inflate the number of carbon credits issued. As a result, the Supplier managed to fraudulently obtain and sell millions of VCUs while successfully raising $250 million in its equity offering in early 2023.
On October 2, 2024, the U.S. DOJ announced parallel prosecutions against the Supplier’s former CEO and Head of Carbon & Sustainability Accounting Team for the implemented fraudulent scheme. While the U.S. Attorney’s Office for the Southern District of New York announced the unsealing of criminal charges of wire fraud, securities fraud and commodities fraud, the Securities and Exchange Commission (the SEC) and the Commodity Futures Trading Commission (the CFTC) also filed civil actions against those two individuals.
The DOJ decided not the prosecute the Supplier due to its (i) complete voluntary disclosure of the misconduct to authorities following its internal investigation; (ii) full and proactive cooperation with the prosecution; and its (iii) timely and appropriation remediation, such as instituting appropriate compliance measures to deter and detect similar misconduct in the future.
It is to be noted that the Supplier’s story is part of a bigger drive by the U.S. government agencies to further regulate the carbon credits industry.
