(Reuters) – The US Securities and Exchange Commission on Tuesday said it charged the blank check company Stable Road Acquisition Corp., its sponsor SRC-NI, the space research company Momentus Inc. and two heads of misleading claims about their planned merger.  The US Securities and Exchange Commission said that companies and Stable Road Acquisition Co.'s CEO Brian Kabot agreed to pay $ 8 million to resolve allegations that they misled investors about Momentus Inc's technology and national security risks in in connection with its former CEO Mikhail Kokorich
The entities, whose lawyers did not immediately respond to requests for comment, settled with the SEC without acknowledging or denying the allegations. A lawyer for Mr Kokorich, who is fighting the SEC's lawsuits in court, said his client "is looking forward to a solution to this issue that is in his favor."
The enforcement case marks the latest escalation in the SEC & # 39 ;s action against Wall Street & # 39 ;s specialty company, or SPAC, frenzy, which has reached a record $ 1
The SEC's action is the first to target all sides of a SPAC transaction as well as executives in an investigation that took over a
According to the SEC, Kokorich and Momentus, an early-stage space transport company, repeatedly told investors that they "successfully tested" their propulsion technology in space, when the only space test had failed to achieve its primary objectives or demonstrated the commercial profitability of the technology.
The regulator also claimed that Momentus and Mr. Kokorich erroneously stated the extent to which national security concerns the invoice that Kokorich undermined Momentus' ability to secure government licenses necessary for its operations. The SEC accused Stable Road, its sponsor and Mr. Kabot for negligence-based fraud.
SPACs are listed shell companies that are used to make private companies public and circumvent the more traditional and long IPO. SPAC critics say that contract structures create conflicts of interest and often lack sufficient controls and balances to protect investors.
The deal gives Stable Road private investors the chance to redeem their cash, while private investors will be informed of the extent of redemption before voting on whether the merger will be green next month. SRC-NI also confiscates 250,000 shares that they would otherwise have received if the deal went through.
"This case illustrates risks inherent in SPAC transactions, as those responsible for making significant profits from a SPAC merger may do insufficient due diligence and mislead investors," said SEC President Gary Gensler in a statement.
Momentus said in October that it would be announced through a $ 1.2 billion merger with Stable Road, which was reduced to $ 700 million last month. Stable road stock prices have fallen 60% from a February high of over $ 29.