Momentus, an early-stage space transportation company, claims to have achieved successful results with the tests of its propulsion technology carried out in space. The company and its ex-CEO Mikhail Kokorich have made this assertion repeatedly to investor audiences. The apparent mistruths in the assertions are now tumbling out, on account of its proposed acquisition by Stable Road Acquisition Company (SRAC), a Special Purpose Acquisition Company (SPAC).
Several parties involved in the transaction, that include SRAC CEO Brian Kabot, SRC-NI, the sponsor of SRAC, Momentus Inc. itself, along with its ex-CEO Kokorich, are being charged for fraud by the Securities Exchange Commission (SEC).
Investors are encouraged to call our experienced investment fraud lawyers at 1-800-856-3352 for a free consultation on recovery losses.
Understanding a SPAC
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A SPAC, or Special Purpose Acquisition Company, operates by raising money for potential mergers and/ or buyouts. A merger/ acquisition can usually be completed by a SPAC within 3 to 6 months, as opposed to an IPO. However, there is no specific target at the time money is raised. This makes it a riskier proposition for investors and provides greater opportunities for fraud to happen. A SPAC’s sponsor has an outsized say in running the company and deciding on acquisition targets, which could lead to a conflict of interest and compromise the interest of ordinary investors. Investors could face situations where there is or little no profit generated. It is also possible that no transaction goes through.
SEC’s charges Stable Road Acquisition Company
The accusations levied by the SEC pertain to the misleading claims about the success of Momentum’s technology and testing, that have been made to investors, as well as for the security risks that emanate on account of Kokorich.
Contrary to the company and SRAC’s claims, the SEC has contended that there was only one test that was carried out. And this test, besides not being able to demonstrate commercial viability, had actually failed its primary objectives. On top of the technological challenge were the security issues around Kokorich which put the company at a disadvantage in its ability to obtain the required government licenses. This fact was not highlighted by the company.
The misleading statements of Momentum were repeated and even included in public filings by SRAC. SRAC also stands accused of not doing the due diligence which they were required to, and which, it seems, they claim they did do.
SRAC CEO Kabot has been involved not only in the filing of inaccurate statements and solicitations but also in the due diligence-related failure.
Anita B. Brandy, Associate Director at the SEC’s Division of Enforcement, has revealed that Kokorich would have become the beneficiary of $200M in shares had the merger gone through, as a result of the approval obtained from shareholders. This tantamounts to fraud and misrepresentation for which the regulator has sought permanent injunctions, penalties, and disgorgement with prejudgment interest. They also seek him being barred from holding any officer or director position in future.
Settlement and penalties for Stable Road Acquisition Company
Stable Road Acquisition Corp, Momentus, SRC-NI, and Kabot have consented to an order mandating that they cease and desist from committing future violations moving forward without denying or admitting to the findings.
Excepting the national investment-related concerns and charges involving Kokorich, the other accused parties have settled the issue with the SEC, including paying a penalty of over $8 million. Of this amount, Momentus will pay $7M, Stable Road $1M, while Brian Kabot, the CEO of SRAC, will cough up $40K.
SRC-NI will also forfeit the founder’s shares it would have obtained if the merger, which is slated for this month.
Investors who believe they have lost money on account of being recommended a SPAC for investment by an advisor, disregarding their investing profile and objectives, should contact Haselkorn & Thibaut, P.A. (InvestmentFraudLawyers.com). Our investment attorneys represent investors and help them explore legal options for recovery. They can be reached at 1-800-856-3352.