ADMINISTRATIVE PROCEEDING
File No. 3-21438

May 23, 2023 - The Securities and Exchange Commission today announced settled charges against Colorado-based Gaia, Inc. for overstating the number of the company's paying subscribers, and Gaia's CFO, Paul C. Tarell, Jr., for causing Gaia's overstatement. The SEC also charged Gaia with retaliating against a whistleblower and impeding former employees from communicating with the Commission about potential securities law violations.

The SEC's order finds that Gaia overstated the number of its paying subscribers for the first quarter of 2019 in an earnings call and a current report. According to the order, on April 29, 2019, Gaia announced that it met its previously forecasted subscriber target and "ended the [first] quarter with 562,000 paying subscribers." The order also finds that on an earnings call that same day, Tarell represented that this figure excluded "subscribers for whom we were unable to successfully charge on our last renewal due to their credit cards becoming invalid." These statements were false, according to the order, because (i) Gaia's reported number of paying subscribers for the quarter included approximately 15,000 subscribers that had been gifted a free month in mid-March 2019, and had neither paid through the end of the month nor reactivated their paying memberships; and (ii) the reported number of paying subscribers also included approximately 4,500 others that Gaia was unable to successfully charge because the associated credit cards were declined.

According to the order, Gaia also retaliated against a whistleblower who reported the subscriber count issue both internally to Gaia management and to the Commission, when it terminated the whistleblower "for cause." The order further finds that from July 2018 through August 2021, Gaia included provisions in 23 employee severance agreements that required employees to forgo any monetary recovery in connection with providing information to the Commission, and thereby impeded individuals from communicating directly with Commission staff about possible securities law violations.

In connection with the overstatement, the SEC's order finds that Gaia violated Section 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as well as Section 13(a) of the Securities Exchange Act of 1934 and Rules 12b-20 and 13a-11 thereunder, and that Tarell caused those violations by Gaia. The SEC's order also finds that Gaia violated the securities whistleblower protection provisions of Section 21F(h) of the Exchange Act, and Rule 21F-17 thereunder. Without admitting or denying the findings, Gaia and Tarell consented to a cease-and-desist order. In addition, Gaia agreed to a $2 million civil penalty and certain specified undertakings, and Tarell agreed to a $50,000 civil penalty.

The SEC's investigation was conducted Adam S. Ross and Michael F. D'Angelo, and was supervised by Mary S. Brady, Nicholas P. Heinke, and Jason J. Burt of the Denver Regional Office.