What the Record Shows

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• This site presents a documentary record concerning the events surrounding David Kovacs, a former senior executive of AudioEye, Inc. The materials include sworn declarations, contemporaneous communications, public filings, audio recordings, and court pleadings.​​
   

• The purpose of this page is not to argue conclusions. It is to orient readers to the categories of legal and governance issues that the documented record may implicate, and to direct readers to the primary sources on which those issues rest.​​
   

• Readers are encouraged to review the underlying materials and draw their own conclusions.

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Fiduciary Breaches by Officers and Directors

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The materials raise serious questions regarding the conduct of corporate officers and directors following notice of alleged misconduct, including oversight failures, disclosure decisions, and responses to whistleblower reports.

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Officers and directors of public companies owe fiduciary duties of loyalty, care, and good faith to the corporation and its shareholders. Those duties are implicated not only by affirmative acts, but by how decision-makers respond after receiving notice of credible concerns. The record documents when notice was given and what actions followed.

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Two categories of potential fiduciary breach are implicated.

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First: Loyalty Breach and Usurpation of Corporate Opportunity by Insiders.

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The record raises questions as to whether senior insiders exploited access to material non-public information for personal gain. Insiders sold approximately $35 million of stock near the market peak, during a period when AudioEye publicly represented that it had achieved profitability.

 

At the same time, the materials allege that the stock price was artificially inflated and not reflective of underlying fundamentals. If insiders monetized personal holdings while in possession of adverse or undisclosed information, this may constitute a classic loyalty breach—diverting corporate value to insiders at shareholder expense.

 

Second: Oversight Failure by Independent Directors.

 

Separately, the record raises questions regarding the conduct of independent directors after receiving notice of alleged misconduct and whistleblower reports. Independent directors are obligated to exercise meaningful oversight, particularly when allegations implicate senior management. A failure to initiate independent review, impose controls, or reassess disclosures following notice may constitute a breach of the duty of care and good faith, regardless of ultimate liability on the underlying allegations.

 

Primary sources include:​

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• Board-level communications

• Corporate governance documents and policies

• Public disclosures and omissions

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→ See Timeline  |  See Record  |  See Organize

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Misuse of Corporate Funds for Retaliation

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The record describes the use of corporate resources in connection with litigation, public communications, and other actions taken following whistleblower disclosures. These materials raise governance and indemnification issues concerning whether company assets were used for retaliatory or non-corporate purposes.

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Upon information and belief, AudioEye has spent approximately $2.7 million of shareholder funds on a “smear and retreat” litigation and communications campaign directed at a former employee and whistleblower. According to the Company’s balance sheet, AudioEye reported $4.6 million in total cash as of September 30, 2025.

 

On that cash basis, $2.7 million represents approximately 58.7% of the Company’s reported cash. This estimate is separate from, and may be in addition to, any amounts paid or reimbursed through directors’ and officers’ insurance or other third-party coverage arrangements.

 

The record further describes allegations that numerous smear allegations were later abandoned, materially retracted, or narrowed. If accurate, the use of corporate funds for such activity raises serious governance and indemnification issues—including questions of corporate waste, loyalty, and oversight, and whether expenditures primarily served personal rather than corporate purposes.

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Primary sources include:

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• Litigation filings

• Corporate correspondence

• Public statements and disclosures​

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→ See Timeline  |  See Record  |  See Organize

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Whistleblower Retaliation

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The record reflects internal reporting of suspected misconduct, followed by termination, loss of equity, threats, and subsequent litigation. Federal and state laws protect employees from retaliation for good-faith reporting of suspected legal violations.

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The materials document the timing of disclosures, board-level notice, termination decisions, and post-termination conduct.

 

Primary sources include:
 

• Emails and communications to Human Resources and senior leadership

• A recorded call with the Executive Chairman

• DOJ and SEC whistleblower submissions

• Termination and equity-revocation correspondence
   

→ See Timeline  |  See Record  |  See Organize

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Obstruction / Witness Tampering

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The record includes declarations and communications describing efforts to intimidate, silence, or pressure witnesses and whistleblowers, including conduct occurring after disclosures were made to authorities.

 

These materials raise issues concerning interference with witnesses, obstruction of justice, and retaliation through third parties.

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Primary sources include:

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• Witness declarations

• Recorded communications and voicemails

• Contemporaneous messages documenting pressure campaigns​
   

→ See Timeline  |  See Record  |  See Organize

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Securities Fraud - Rule 10b-5​

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Finally, the record raises securities-related concerns that intersect with, but do not depend upon, the resolution of any single fraud theory. The materials describe a period during which AudioEye publicly conveyed a turnaround narrative while senior insiders monetized substantial personal holdings near peak valuations.

 

If insiders possessed material non-public information that was inconsistent with public statements or omitted from disclosures, such circumstances may implicate disclosure obligations and insider-trading controls, irrespective of whether enforcement authorities ultimately pursue action.

 

For shareholders, the significance lies less in predicting regulatory outcomes and more in assessing whether disclosure practices, trading oversight, and board-level supervision functioned as intended during a critical market window.

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Primary sources include:​

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• Board-level communications

• Corporate governance documents and policies

• Public disclosures and omissions

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→ See Timeline  |  See Record  |  See Organize
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Corporate Governance Reforms

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This effort is directed toward the long-term benefit of AudioEye and its shareholders by promoting professional, accountable corporate governance.

 

Effective reform requires an engaged and independent board, robust and audited internal controls, and accurate, complete disclosures to the market. Public companies are obligated to operate for the benefit of shareholders as a whole, not to advance the personal interests or reputational concerns of individual insiders.

 

The record suggests that improved oversight, clearer separation between personal and corporate interests, and strengthened governance practices could materially enhance the Company’s performance, credibility, and shareholder value. In that sense, accountability and reform are not punitive measures, but mechanisms to restore trust, operational discipline, and sustainable profitability.

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→ See Timeline  |  See Record  |  See Organize

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Economic and Legal Implications

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The record suggests not only governance deficiencies, but also potential avenues for recoverable value and shareholder remediation.

 

• Substantial corporate expenditures on litigation and communications that were later abandoned, combined with significant insider stock monetization near peak valuations, raise questions about capital stewardship, disclosure practices, and duty of loyalty.
   

• If substantiated, these factors could support derivative claims, disgorgement of improperly accrued insider gains, ERISA-related recovery of wrongfully terminated equity and benefits, and examination of directors’ and officers’ insurance coverage.​
   

• Strengthening board oversight, internal controls, and disclosure transparency is not only a governance imperative, but also a mechanism to protect enterprise value and align management conduct with shareholder interests going forward.

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→ See Timeline  |  See Record  |  See Organize​​

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Procedural Context

 

Two earlier related proceedings in New York state court were filed and resolved on technical and procedural grounds before the full scope of the alleged misconduct, retaliation, and related governance issues became known. Those cases concerned narrow employment matters and did not involve an adjudication of the merits. Both decisions are being appealed.

 

Separately, AudioEye and its CEO initiated a defamation action in Florida asserting a series of allegations against David Kovacs that were later abandoned, withdrawn, or materially walked back.

 

Importantly, while Mr. Kovacs’s individual claims have a procedural history that may continue to involve litigation, potential class and derivative claims concerning insider conduct, misuse of corporate assets, disclosure practices, and board oversight have never been adjudicated on the merits.

 

The claims involving (a) harm to shareholders, or (b) harm to AudioEye asserted derivatively, are expected to be pursued, if at all, by shareholders without individual employment-related issues, including additional shareholders who have been identified and may serve as appropriate lead plaintiffs. While the SDNY Complaint is styled as a comprehensive pleading, individual Kovacs claims may be tried separately from the class-wide or derivative theories.

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→ See Timeline  |  See Record  |  See Organize​​​

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About This Record

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This site is intended to make the underlying materials publicly accessible in one place. The record does not depend on any single document, witness, or narrative. It consists of multiple, independent sources that can be evaluated individually and collectively.

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Nothing on this site is intended to substitute for judicial findings, regulatory determinations, or independent investigation.​