Cloudflare Discloses Possible Regulatory Violations

Cloudflare, a website security company, providing CDN, DDoS mitigation, and other website infrastructure services, may have violated U.S. regulations, according to a disclosure in a regulatory filing.

Cloudflare is in the process of creating an initial public offering, and may go public this week. The company in documents declaring the intention to go public, voluntarily disclosed potential violations of U.S. economic and trade sanctions to the Treasury Department.

According to the Wall Street Journal, “The prospectus, filed with the Securities and Exchange Commission last month, was amended last week. The company said in the filing that it made the self-disclosure in May to the Treasury’s Office of Foreign Assets Control, which enforces U.S. sanctions, and the self-disclosure is under review by the agency.”

In the filing Cloudflare said it determined some of its products have been used by, individuals and entities that are blacklisted by the U.S. government. Some of these parties payed the company for their use of the Cloudflare platform.

According to the filing some users of the services included entities the U.S. designated as terrorists and narcotics traffickers, or who are affiliated with governments currently subject to U.S. sanctions. This leaves a lot of room for interpretation, as the description could me any entity from El Chapo to Huawei.

The company disclosed also the possibility it violated U.S. export control regulations. Cloudflare has submitted self-disclosures to the Commerce Department and to the Census Bureau regarding these potential Foreign Trade Regulations violations. The company said it learned this year it may have submitted incorrect information to the U.S. government regarding hardware exports.

Not related to these disclosures, in the updated filing, Cloudflare has also raised the expected pricing range for its upcoming IPO. They now plan to sell 35 million shares at a price range of $12 – $14, this could mean a total raise of up to $490 million.

While the company had a $3B valuation as of its last private funding round, it is still losing money. Although the revenue for Cloudflare was 48% higher in the first six months of 2019 than the 12 months prior, net loss grew from $4 million to $36.8 million.

Header Image: “Clouds” by Chris.L.Dodds

Comments are closed, but trackbacks and pingbacks are open.