The SEC announced charges against Stable Road Acquisition, its sponsor SRC-NI, CEO Brian Kabot, the SPAC’s proposed merger target Momentus and Momentus’s founder and former CEO Mikhail Kokorich for misleading claims about Momentus’s technology and about national security risks associated with Kokorich. The SEC’s litigation is proceeding against Kokorich, against whom the SEC filed a complaint in the U.S. District Court for the District of Columbia. All other parties are settling with the SEC, with terms including total penalties of more than $8 million, tailored investor protection undertakings, and the SPAC sponsor’s forfeiture of founder’s shares it stands to receive if the merger, currently scheduled for August 2021, is approved.
According to the SEC’s settled order, Kokorich and Momentus, an early-stage space transportation company, repeatedly told investors that it had “successfully tested” its propulsion technology in space when, in fact, the company’s only in-space test had failed to achieve its primary mission objectives or demonstrate the technology’s commercial viability. The order finds that Momentus and Kokorich also misrepresented the extent to which national security concerns involving Kokorich undermined Momentus’s ability to secure required governmental licenses essential to its operations. In addition, the order finds that Stable Road repeated Momentus’s misleading statements in public filings associated with the proposed merger and failed its due diligence obligations to investors. According to the order, while Stable Road claimed to have conducted extensive due diligence of Momentus, it never reviewed the results of Momentus’s in-space test or received sufficient documents relevant to assessing the national security risks posed by Kokorich. The order finds that Kabot participated in Stable Road’s inadequate due diligence and in filing its inaccurate registration statements and proxy solicitations. The SEC’s complaint against Kokorich includes factual allegations that are consistent with the findings in the order. Read more.