The SEC announced settled fraud charges against Hyzon Motors, an upstate New York-based company that builds hydrogen fuel cell electric vehicles, for misleading investors about its business relationships and vehicle sales before and after a July 2021 merger with a SPAC. The SEC also charged Craig M. Knight, Hyzon’s former CEO, and Max C.B. Holthausen, former managing director of Hyzon’s European subsidiary, for their roles in the fraudulent scheme.
According to the SEC’s complaint, Hyzon misrepresented the status of its business dealings with potential customers and suppliers to create the false appearance that significant sales transactions were imminent. The complaint alleges that Hyzon also falsely stated that it had delivered its first electric vehicle in July 2021, even going as far as posting a misleading video of the vehicle purportedly running on hydrogen, when the vehicle was not equipped to operate on hydrogen power.
The complaint further alleges that Hyzon later falsely reported that it sold 87 vehicles in 2021, when in fact it had not sold any vehicles that year. Knight allegedly was responsible for the false statements about Hyzon’s customer and supplier relationships. Holthausen allegedly was responsible for Hyzon’s false statements about delivery of its first vehicle and for Hyzon’s false reporting of certain sales.
The SEC’s complaint, filed in U.S. District Court for the Western District of New York, charges Hyzon, Knight, and Holthausen with violating the antifraud and other provisions of the federal securities laws.
Without admitting or denying the SEC’s allegations, Hyzon, Knight, and Holthausen each consented to permanent injunctions and to pay $25 million, $100,000, and $200,000, respectively, in civil penalties.
Knight and Holthausen also agreed to prohibitions from serving as officers or directors of a publicly traded company for a period of five and 10 years, respectively. The settlements are subject to court approval.
In addition, Knight and Mark Gordon, Hyzon’s former chief financial officer, each reimbursed Hyzon $252,000 and $122,500, respectively, for bonuses they received during the twelve-month period after Hyzon misstated its financial statements. As a result, the SEC did not pursue a clawback action against them under Section 304 of the Sarbanes-Oxley Act of 2002. The SEC’s complaint did not charge Gordon with misconduct.
Hyzon combined with Decarbonization Plus in July 2021. The pro forma implied enterprise value of the combined company was $2.1 billion at the time. Read more.
