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People leave the US Securities and Exchange Commission (SEC) headquarters in Washington, D.C., on May 12, 2021. REUTERS/Andrew Kelly/File Photo REUTERS/Andrew Kelly/File Photo (Reuters) – WASHINGTON, July 13 (Reuters) – On Tuesday, the US Securities and Exchange Commission sued Stable Road Acquisition Corp (SRAC.O), its sponsor SRC-NI, space exploration company Momentus Inc, and two executives with making false representations about their planned merger. The companies and Stable Road Acquisition Company Chief Executive Brian Kabot agreed to pay $8 million to settle allegations that they misled investors about Momentus Inc.’s technology and national security risks associated with its former CEO Mikhail Kokorich, according to the US Securities and Exchange Commission. The entities, whose lawyers did not immediately reply to requests for comment, reached an agreement with the SEC that did not admit or dispute the charges. Kokorich’s lawyer, who is defending the SEC’s claims in court, said his client “looks forward to a favorable settlement of this issue.” The SEC’s crackdown on Wall Street’s special purpose acquisition company, or SPAC, frenzy, which has hit a record high of over $100 billion this year, has reached a new high with this enforcement case. find out more According to an SEC spokesman, the SEC’s action is the first to target all parties of a SPAC transaction as well as executives in a year-long probe. According to the SEC, Kokorich and Momentus, an early-stage space transportation company, repeatedly told investors that its propulsion technology had “successfully tested” in space, despite the fact that its only in-space test had failed to achieve its primary objectives or demonstrate the technology’s commercial viability. Momentus and Kokorich also allegedly misrepresented the extent to which national security concerns surrounding Kokorich harmed Momentus’ ability to get government licenses required for its operations, according to the regulator. Stable Road, its sponsor, and Kabot were charged with negligence-based fraud by the SEC. SPACs are publicly traded shell corporations that are used to take private firms public without having to go through the lengthy and traditional initial public offering process. Critics of SPACs claim that the deal structures create conflicts of interest and that there aren’t always enough checks and balances in place to protect investors. Stable Road’s private investors will be able to redeem their money under the terms of the agreement, while retail investors will be informed of the level of redemptions before voting on whether to approve the merger next month. If the sale goes through, SRC-NI will also lose 250,000 shares it would have received otherwise. “This lawsuit demonstrates the risks inherent in SPAC mergers,” SEC Chair Gary Gensler said in a statement. “Those who stand to profit significantly from a SPAC merger may perform inadequate due diligence and mislead investors.” Momentus said in October that it would go public via a $1.2-billion merger with Stable Road, which was since reduced to $700 million. Stable Road’s stock has dropped 60% from its February high of almost $29. Chris Prentice contributed reporting, while Michelle Price, Dan Grebler, and Richard Pullin edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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