SEC charges blank check firm Stable Road, space start-up Momentus over misleading claims

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Key Points
  • According to the SEC, Stable Road CEO Brian Kabot and Momentus repeatedly told investors that it had "successfully tested" its propulsion technology in space, when its only in-space test had failed to achieve its primary objectives.
  • The regulator also alleged that Momentus and Kokorich misrepresented the extent to which national security concerns involving Kokorich undermined Momentus' ability to secure required governmental licenses essential to its operations.

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The U.S. Securities and Exchange Commission in Washington, D.C.
Adam Jeffery | CNBC

The U.S. securities regulator on Tuesday said it charged blank-check company Stable Road Acquisition, its sponsor SRC-NI, space exploration company Momentus and two executives for misleading claims over their planned merger.

The U.S. Securities and Exchange Commission said the companies and Stable Road Acquisition Company Chief Executive Brian Kabot agreed to pay $8 million to resolve allegations that they misled investors about Momentus' technology and national security risks associated with its former CEO Mikhail Kokorich.

The entities, which did not respond immediately to requests for comment, settled with the SEC without admitting or denying the allegations. Kokorich, who could not immediately be reached for comment, is fighting the SEC's charges in court.

According to the SEC, Kokorich and Momentus, an early-stage space transportation company, repeatedly told investors that it had "successfully tested" its propulsion technology in space, when its only in-space test had failed to achieve its primary objectives or demonstrate the technology's commercial viability.

The regulator also alleged that Momentus and Kokorich misrepresented the extent to which national security concerns involving Kokorich undermined Momentus' ability to secure required governmental licenses essential to its operations.

The two companies said last year they expected to merge in a $1.2 billion transaction, which they revised down to $700 million last month.

The enforcement case marks the latest escalation in the SEC's crackdown on Wall Street's special purpose acquisition company, or SPAC, frenzy, which has hit a record number of deals this year.

SPACs are listed shell companies used to take private companies public, sidestepping the more traditional and lengthy initial public offering process. SPAC critics say the deal structures create conflicts of interest and frequently lack sufficient checks and balances to protect investors.