SPAC Parties Settle SEC Charges For Misrepresentations And Diligence Failures

A special purpose acquisition corporation ("SPAC"), its sponsor, CEO and proposed merger target settled SEC charges for misrepresentations and due diligence failures that led to investors purchasing stock in the merged company. In a related Complaint filed in the U.S. District Court for the District of Columbia, the SEC charged the merger target's CEO with misrepresentations of material facts.

According to the SEC Order, the merger target - a privately held space company - and the SPAC told investors repeatedly that the merger target had "successfully tested" its key technology when, in fact, the test (i) had failed to meet the merger target's own pre-launch criteria and (ii) was conducted on a noncommercial prototype. Moreover, the SPAC's public filings incorporated the misinformation and were signed by the SPAC CEO. As a result: