Category: Misleading Investors

Misleading Investors in the financial markets involves the dissemination of false or deceptive information regarding securities, assets, or market conditions with the intent to manipulate prices or influence investor decisions. This can include misrepresenting financial statements, exaggerating company performance, understating risks, or spreading false rumors to create artificial market movements. Such actions aim to attract investment or inflate asset prices, often resulting in financial losses for those who rely on inaccurate information to make investment decisions. Regulatory bodies enforce strict rules and regulations to prevent such practices, ensuring transparency, fairness, and investor protection within the financial markets. Maintaining integrity and trust through accurate disclosure and ethical conduct is crucial for maintaining market stability and investor confidence.

SEC-PR-2024-89

Categories Investment Fraud Misleading Investors SEC-2407
SEC NEWS - SEC-PR-2024-89SEC-PR-2024-89 (JUL. 26, 2024)
PRESS RELEASE | SEC-PR-2024-89

SEC Charges Andrew Left and Citron Capital for $20 Million Fraud Scheme. Boca Raton short seller used ‘bait-and-switch’ tactics to mislead investors

Washington D.C., July 26, 2024 — The Securities and Exchange Commission today announced charges against activist short seller Andrew Left and his firm, Citron Capital LLC, for engaging in a $20 million multi-year scheme to defraud followers by publishing false and misleading statements regarding his supposed stock trading recommendations.

The SEC’s complaint alleges that Left, who resides in Boca Raton, Fl., used his Citron Research website and related social media platforms on at least 26 occasions to publicly recommend taking long or short positions in 23 companies and held out the positions as consistent with his own and Citron Capital’s positions. The complaint alleges that following Left’s recommendations, the price of the target stocks moved more than 12 percent on average. According to the SEC’s complaint, once the recommendations were issued and the stocks moved, Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements. As a consequence, Left bought back stock immediately after telling his readers to sell, and he sold stock immediately after telling his readers to buy.

“Andrew Left took advantage of his readers. He built their trust and induced them to trade on false pretenses so that he could quickly reverse direction and profit from the price moves following his reports,” said Kate Zoladz, Director of the SEC’s Los Angeles Regional Office. “We uncovered these alleged bait-and-switch tactics, which netted Left and his firm $20 million in ill-gotten profits, and we intend to hold Left and his firm accountable for their actions.”   

The complaint alleges that Left and Citron Capital made several false and misleading statements in connection with the scheme. For example, it alleges that defendants told the market that they would stay long on a target stock until the price hit $65 when, in fact, they immediately began selling the stock at $28. It further alleges that they falsely represented to the market that Citron Research was an independent research outlet that had never received compensation from third parties to publish information about target companies when, in fact, the defendants had entered into compensation arrangements with hedge funds. 

The SEC’s complaint, filed in the United States District Court for the Central District of California, charges Left and Citron Capital with violating antifraud provisions of the federal securities laws. Among other remedies, the complaint seeks disgorgement, prejudgment interest, and civil monetary penalties against Left and Citron and conduct-based injunctions, an officer-and-director bar, and a penny stock bar against Left.

In a parallel action, the Fraud Section of the Department of Justice and the U.S. Attorney’s Office for the Central District of California today announced charges against Left.

The SEC previously settled ⊗ (PDF) public administrative charges against Dallas-based registered investment adviser Anson Funds Management LP and Toronto-based exempt reporting adviser Anson Advisors Inc. for conduct involving their relationship with Left and other short publishers.  

The SEC reminds investors ⊗ to be skeptical and never make investment decisions based solely on information from social media or other unverified platforms.

The SEC’s investigation, which is ongoing, is being conducted by Sarah Nilson and Wendy Pearson and supervised by Finola Manvelian. Carina Chambarry and Michael Barnes in the SEC’s Division of Economic and Risk Analysis and Darren Boerner in the Division of Enforcement’s Market Abuse Unit provided assistance. The litigation will be led by Stephen Kam and Ruth Pinkel and supervised by Doug Miller. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

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SEC-PR-2024-88

Categories Investment Fraud Misleading Investors Ponzi Schemes SEC-2407
SEC NEWS - SEC-PR-2024-88SEC-PR-2024-88 (JUL. 25, 2024)
PRESS RELEASE | SEC-PR-2024-88

Securities and Exchange Commission Charges Virginia Engineer with Orchestrating $30 Million Offering Fraud

Washington D.C., July 25, 2024 — The Securities and Exchange Commission today charged Babu Ramaraj, a resident of Aldie, Virginia, with defrauding more than 70 investors of approximately $31 million through his company, DAB Inspection and Consulting Services LLC.

The SEC’s complaint alleges that, from February 2019 through May 2024, Ramaraj solicited and lured his victims with the promise of 40-60 percent annual investment returns. According to the complaint, Ramaraj falsely told investors that he would use their funds to finance surety and performance bonds for large-scale, lucrative contracts DAB had been awarded to provide quality assurance services to state and local governments. Ramaraj allegedly created fake contracts and financial documentation to support his misrepresentations. The SEC alleges that, in reality, the contracts never existed, and Ramaraj instead used investor funds to purchase luxury automobiles, jewelry, and property, engage in unprofitable options trading, and pay earlier investors.

“As we allege, Ramaraj promised his investors unrealistic returns from government contracts he never had and then used their money to fund his own lifestyle and to make Ponzi-like payments to maintain the deception,” said Scott A. Thompson, Associate Director of Enforcement in the SEC’s Philadelphia Regional Office. “We will continue to hold accountable those who exploit investors’ trust for personal gain.”

The SEC’s complaint, filed in the United States District Court for the Eastern District of Virginia, charges Ramaraj with violating antifraud provisions of the federal securities laws and seeks an injunction, disgorgement, penalties, and an officer-and-director bar.

In a parallel action, in June 2024, the U.S. Attorney’s Office for the Eastern District of Virginia announced criminal charges against Ramaraj for wire fraud and unlawful monetary transactions. Those charges are pending.

The SEC’s investigation was conducted by Christine R. O’Neil, Matthew B. Homberger, and Michael A. Cuff in the Philadelphia Regional Office. It was supervised by Brian R. Higgins, Brendan P. McGlynn, Mr. Thompson, and Nicholas P. Grippo. The SEC’s litigation will be led by Karen M. Klotz and Judson Mihok and supervised by Gregory R. Bockin. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Eastern District of Virginia, the FBI, and the Virginia State Corporation Commission.

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DOJ-PR-240612.1

Categories Investment Advisers Investment Fraud Making False Statements Misleading Investors

DOJ PUBLIC DOCUMENT - DOJ-PR-240612.1File ID:  DOJ-PR-240612.1

Date:  June 12, 2024

Accessed:  July 11, 2024

Headline:  New York Fund Manager Admits Multimillion-Dollar Investment Fraud Scheme

Source:  https://www.justice.gov/usao-nj/pr/new-york-fund-manager-admits-multimillion-dollar-investment-fraud-scheme

Categories:

  • INVESTMENT ADVISORS
  • INVESTMENT FUND FRAUD
  • MAKING FALSE STATEMENTS
  • MISLEADING INVESTORS

DOJ-PR-240612.1 – Viewer: ▼▼▼ (Download PDF File ⊗)

DOJ-PR-240612.1

SEC-PR-2024-82

Categories Misleading Investors SEC-2407
SEC NEWS - SEC-PR-2024-82SEC-PR-2024-82 (JUL. 1, 2024)
PRESS RELEASE | 2024-82

SEC Charges Silvergate Capital, Former CEO for Misleading Investors about Compliance Program. Former Chief Risk Officer and former CFO also charged for misleading investors.

Washington D.C., July 1, 2024 — The Securities and Exchange Commission today charged Silvergate Capital Corporation, its former CEO Alan Lane, and former Chief Risk Officer (CRO) Kathleen Fraher with misleading investors about the strength of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program and the monitoring of crypto customers, including FTX, by Silvergate’s wholly owned subsidiary, Silvergate Bank. The SEC also charged Silvergate and its former Chief Financial Officer, Antonio Martino, with misleading investors about the company’s losses from expected securities sales following FTX’s collapse. All parties charged, aside from Martino, have agreed to settle the SEC’s charges.

According to the SEC’s complaint, from November 2022 to January 2023, Silvergate, Lane, and Fraher misled investors in stating that Silvergate had an effective BSA/AML compliance program and conducted ongoing monitoring of its high-risk crypto customers, including FTX, in part to rebut public speculation that FTX had used its accounts at Silvergate to facilitate FTX’s misconduct. In reality, Silvergate’s automated transaction monitoring system failed to monitor more than $1 trillion of transactions by its customers on the bank’s payments platform, the Silvergate Exchange Network.

“At all times, but especially during moments of crises, public companies and their officers must speak truthfully to the investing public. Here, we allege that Silvergate, Lane and Fraher fell not only woefully, but also fraudulently, short in that regard,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Rather than coming clean to investors about serious deficiencies in its compliance programs in the wake of the collapse of FTX, one of Silvergate’s largest banking customers, they doubled down in a way that misled investors about the soundness of the programs. In fact, because of those deficiencies, Silvergate allegedly failed to detect nearly $9 billion in suspicious transfers among FTX and its related entities. Silvergate’s stock eventually cratered, wiping out billions in market value for investors.”

The SEC’s complaint also alleges that Silvergate and Martino misrepresented the company’s bleak financial condition during a liquidity crisis and bank run following FTX’s collapse. The complaint alleges that Silvergate and Martino, in an earnings release and earnings call, understated Silvergate’s losses from expected security sales and misrepresented that it remained well-capitalized as of December 31, 2022. In March 2023, Silvergate announced it would wind down its banking operations, and its stock eventually plummeted to near $0.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Silvergate, Lane, and Fraher with negligence-based fraud and charges Silvergate with violating certain reporting, internal accounting controls, and books-and-records provisions.

Without admitting or denying the allegations, Silvergate agreed to a final judgment ordering it to pay a $50 million civil penalty and imposing a permanent injunction to settle the charges. Lane and Fraher also settled the charges without admitting or denying the allegations, agreeing to permanent injunctions, five-year officer-and-director bars, and civil penalties of $1 million and $250,000 respectively. All the settlements are subject to court approval, and Silvergate’s payment may be offset by penalties paid to the Board of Governors of the Federal Reserve System (FRB) and/or the California Department of Financial Protection and Innovation (DFPI).

The SEC charged Martino with violating certain of the antifraud and books-and-records provisions of the federal securities laws, and with aiding and abetting certain of Silvergate’s violations.

In parallel actions, FRB and DFPI today announced settled charges against Silvergate.

The SEC’s investigation was conducted by Elizabeth Goody, Michael Keating, Amy Mayer, Heidi Mitza, Pasha Salimi, Ivan Snyder, Katherine Stella, and Katherine Zucca, with assistance from Leigh Barrett and Margaret McGuire, and supervised by Mark R. Sylvester, Michael Brennan, and Jorge G. Tenreiro of the Crypto Assets and Cyber Unit. The litigation against Martino will be led by Hayden Brockett, Peter Mancuso, and Laura Meehan, and supervised by Jack Kaufman and Mr. Tenreiro. The SEC appreciates the assistance of the FRB and DFPI.

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SEC-PR-2024-72

Categories Investment Advisers Investment Fraud Making False Statements Misleading Investors SEC-2406
SEC NEWS - SEC-PR-2024-72SEC-PR-2024-72 (JUN. 12, 2024)
PRESS RELEASE | 2024-72

SEC Charges JAG Capital Advisors and its Founder Joshua Goltry with Defrauding Investors

Washington D.C., June 12, 2024 — The Securities and Exchange Commission today charged Joshua Goltry and his investment management firm, JAG Capital Advisors LLC (JAG Advisors), in connection with a three-year scheme to defraud investors of at least $3 million.

According to the SEC’s complaint, from 2020 to 2023, Goltry, the founder and Chief Investment Officer of a purported equity fund called JAG Cap, LLC, and JAG Advisors, the purported equity fund’s investment manager, raised at least $3 million from approximately nine investors by lying about nearly every aspect of the fund, including its performance, investment activity, and investment risks. Goltry is the principal of JAG Advisors. As alleged, of the funds raised, Goltry and JAG Advisors used at least $1.1 million on personal expenses, including travel and jewelry, and lost more than $1.7 million through high-risk trading and speculative investments. The complaint further alleges that Goltry and JAG Advisors falsified documents, including expense invoices, to conceal the trading losses from investors.   

“As alleged in the complaint, Goltry and JAG Advisors repeatedly lied to investors to lure them into investing in the JAG Fund and then lost their money or stole it to pay for lavish personal expenses,” said Nicholas P. Grippo, Regional Director of the SEC’s Philadelphia Regional Office. “We will continue to diligently hold accountable those who exploit investors’ trust for personal gain.”

The SEC’s complaint charges Goltry and JAG Advisors with violating antifraud provisions of the federal securities laws. Goltry and JAG Advisors agreed to settle the charges against them. The settlement, which is subject to court approval, would permanently enjoin Goltry and JAG Advisors from violating the charged provisions of the federal securities laws and allows the court to decide the amounts of disgorgement, prejudgment interest, and civil penalties at a later date. 

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Goltry.

The SEC’s investigation was conducted by Suzanne C. Abt and Michael Cuff and supervised by Julia C. Green, Scott A. Thompson, and Mr. Grippo, all of the Philadelphia Regional Office. The litigation will be led by Judson T. Mihok and supervised by Gregory R. Bockin.   

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SEC-PR-2024-70

Artificial Intelligence Categories Making False Statements Misleading Investors SEC-2406
SEC NEWS - SEC-PR-2024-70SEC-PR-2024-70 (JUN. 11, 2024)
PRESS RELEASE | 2024-70

Securities and Exchange Commission Charges Founder of AI Hiring Startup Joonko with Fraud

Washington D.C., June 11, 2024 — The Securities and Exchange Commission today charged Ilit Raz, CEO and founder of the now-shuttered artificial intelligence recruitment startup Joonko, with defrauding investors of at least $21 million by making false and misleading statements about the quantity and quality of Joonko’s customers, the number of candidates on its platform, and the company’s revenue.

According to the SEC’s complaint, Joonko claimed to use artificial intelligence to help clients find diverse and underrepresented candidates to fulfill their diversity, equity, and inclusion hiring goals. To raise money for Joonko, the complaint alleges that Raz falsely told investors that Joonko had more than 100 customers, including Fortune 500 companies, and provided investors with fabricated testimonials from several companies expressing their appreciation for Joonko and praising its effectiveness. Raz also allegedly lied to investors that Joonko had earned more than $1 million in revenue and was working with more than 100,000 active job candidates. When an investor grew suspicious of Raz’s claims, Raz allegedly provided the investor with falsified bank statements and forged contracts in an effort to conceal the fraud. According to the complaint, the scheme unraveled in mid-2023 when the investor confronted Raz, who admitted to forging bank statements and contracts and lying about Joonko’s revenue and number of customers.

“We allege that Raz engaged in an old school fraud using new school buzzwords like ‘artificial intelligence’ and ‘automation,’” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “As more and more people seek out AI-related investment opportunities, we will continue to police the markets against AI-washing and the type of misconduct alleged in today’s complaint. But at the same time, it is critical for investors to beware of companies exploiting the fanfare around artificial intelligence to raise funds.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges Raz with violating the antifraud provisions of the federal securities laws and seeks a permanent injunction, civil money penalties, disgorgement with prejudgment interest, and an officer-and-director bar against Raz.

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Raz.

The SEC’s investigation was conducted by Alicia Guo, Ariel Atlas, Neil Hendelman, and Lindsay S. Moilanen and was supervised by Sheldon L. Pollock of the New York Regional Office. The litigation will be led by Ms. Guo and Ms. Atlas, and supervised by Daniel Loss and Mr. Pollock. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the FBI.

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  • SEC Complaint ⊗ (PDF)

SEC-PR-2024-64

Categories Investment Advisers Making False Statements Misleading Investors SEC-2405
SEC NEWS - SEC-PR-2024-64SEC-PR-2024-64 (MAY. 29, 2024)
PRESS RELEASE | 2024-64

SEC Charges Advisory Firm Mass Ave Global and Co-Founder and CEO Winston Feng with False Statements and Undisclosed Conflicts

Washington D.C., May 29, 2024 — The Securities and Exchange Commission today instituted settled proceedings against formerly registered investment adviser Mass Ave Global Inc. (MassAve) and its co-founder and CEO Winston M. Feng for making false and misleading statements to investors in MassAve’s flagship opportunity fund. To settle the SEC’s charges, MassAve agreed to pay a civil penalty of $350,000, and Feng agreed to pay a civil penalty of $250,000. In addition, Feng, who is also the chief investment officer and portfolio manager at MassAve, is suspended for 12 months from industry-related work.

According to the SEC’s orders, from 2020 to 2022, New York City-based MassAve, an investment adviser that made Asia-focused investments and that held more than $1 billion in regulatory assets under management, made a series of materially false and misleading statements about its flagship opportunity fund’s holdings and exposures. The orders found that some of the false statements were the result of modifications Feng made to underlying portfolio data, which MassAve then included in investor communications, such as its monthly tear sheets, summary portfolio snapshots, and top 10 position lists. In addition, according to the SEC’s orders, from late 2022 to early 2023, MassAve did not report to its investors a conflict of interest arising from MassAve’s other co-founder operating a separate hedge fund in China. The SEC’s order against MassAve also found failures in the firm’s compliance policies and procedures.

According to the SEC’s orders, in January 2023, MassAve reported to investors that its communications about the flagship fund were inaccurate and did not contain appropriate disclosures. Soon thereafter, MassAve received a wave of redemption requests and has since been winding down operations.

“Complete and accurate reporting at all turns, whether in investor communications or about conflicts of interest, is vital to investor protection,” said Osman Nawaz, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit. “We will continue to hold individuals accountable for falling short in making such disclosures.”

The SEC’s orders found that MassAve violated the antifraud and compliance provisions of the Investment Advisers Act of 1940 and that Feng violated the antifraud provisions of the Advisers Act. Without admitting or denying the SEC’s findings, MassAve and Feng consented to the entry of the SEC’s orders requiring them to cease and desist from further violations, censuring MassAve, and imposing the penalties listed above.

The SEC’s investigation was conducted by Joseph P. Ceglio and Kelly Rock, of the Division of Enforcement’s Complex Financial Instruments Unit, with assistance from Ling Yu and Travis Hill, of the New York Regional Office, and was supervised by Joshua Brodsky, also of the Complex Financial Instruments Unit.

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CFTC-PR-8882-24

Commodity Fraud Forex Investment Fraud Making False Statements Misleading Investors

CFTC-PR-8882-24

Federal Court Orders Florida Forex Trader to Pay $3.4 Million for Futures, Forex, Options Scheme

Date: Mar. 21, 2014

Date Accessed: Aug. 1, 2024

Source URL:  https://www.cftc.gov/PressRoom/PressReleases/8882-24

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CFTC-PR-8882-24

SEC-PR-2024-36

Artificial Intelligence Categories Investment Advisers Making False Statements Misleading Investors SEC-2403
SEC NEWS - SEC-PR-2024-36SEC-PR-2024-36 (MAR. 18, 2024)
PRESS RELEASE | 2024-36

SEC Charges Two Investment Advisers with Making False and Misleading Statements About Their Use of Artificial Intelligence

Washington D.C., March 18, 2024 — The Securities and Exchange Commission today announced settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their purported use of artificial intelligence (AI). The firms agreed to settle the SEC’s charges and pay $400,000 in total civil penalties.

“We find that Delphia and Global Predictions marketed to their clients and prospective clients that they were using AI in certain ways when, in fact, they were not,” said SEC Chair Gary Gensler. “We’ve seen time and again that when new technologies come along, they can create buzz from investors as well as false claims by those purporting to use those new technologies. Investment advisers should not mislead the public by saying they are using an AI model when they are not. Such AI washing hurts investors.”

“As more and more investors consider using AI tools in making their investment decisions or deciding to invest in companies claiming to harness its transformational power, we are committed to protecting them against those engaged in ‘AI washing,’” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “As today’s enforcement actions make clear to the investment industry – if you claim to use AI in your investment processes, you need to ensure that your representations are not false or misleading. And public issuers making claims about their AI adoption must also remain vigilant about similar misstatements that may be material to individuals’ investing decisions.”

According to the SEC’s order against Delphia, from 2019 to 2023, the Toronto-based firm made false and misleading statements in its SEC filings, in a press release, and on its website regarding its purported use of AI and machine learning that incorporated client data in its investment process. For example, according to the order, Delphia claimed that it “put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else.” The order finds that these statements were false and misleading because Delphia did not in fact have the AI and machine learning capabilities that it claimed. The firm was also charged with violating the Marketing Rule, which, among other things, prohibits a registered investment adviser from disseminating any advertisement that includes any untrue statement of material fact.

In the SEC’s order against Global Predictions, the SEC found that the San Francisco-based firm made false and misleading claims in 2023 on its website and on social media about its purported use of AI. For example, the firm falsely claimed to be the “first regulated AI financial advisor” and misrepresented that its platform provided “[e]xpert AI-driven forecasts.” Global Predictions also violated the Marketing Rule, falsely claiming that it offered tax-loss harvesting services, and included an impermissible liability hedge clause in its advisory contract, among other securities law violations.

Without admitting or denying the SEC’s findings, Delphia and Global Predictions consented to the entry of orders finding that they violated the Advisers Act and ordering them to be censured and to cease and desist from violating the charged provisions. Delphia agreed to pay a civil penalty of $225,000, and Global Predictions agreed to pay a civil penalty of $175,000.

The SEC’s Office of Investor Education and Advocacy has issued an Investor Alert ⊗ about artificial intelligence and investment fraud.

The SEC’s investigations were conducted by Anne Hancock, HelenAnne Listerman, and John Mulhern under the supervision of Kimberly Frederick, Brent Wilner, Corey Schuster, and Andrew Dean with the Division of Enforcement’s Asset Management Unit. Ragni Walker, Thomas Grignol, and Peter J. Haggerty of the Division of Examinations and Roberto Grasso of the Division’s Office of Risk and Strategy assisted with the investigations.

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SEC-PR-2024-29

Categories Exaggerations Misleading Investors
SEC NEWS - SEC-PR-2024-29SEC-PR-2024-29 (FEB. 29, 2024)
PRESS RELEASE | 2024-29

SEC Charges Lordstown Motors with Misleading Investors about Company’s Flagship Electric Vehicle. Company’s former auditor charged with violating auditor independence standards.

Washington D.C., Feb. 29, 2024 — The Securities and Exchange Commission today charged Lordstown Motors Corp. with misleading investors about the sales prospects of Lordstown’s flagship electric pickup truck, the Endurance. Lordstown, which filed for bankruptcy in 2023, went public by merging with a special purpose acquisition company (SPAC) in 2020.

According to the SEC’s settled order, Lordstown exaggerated the demand for the Endurance, claiming that the company had received more than 100,000 nonbinding “pre-orders” for the vehicle from commercial fleet customers when, in reality, most of the pre-orders came from companies that did not operate fleets or intend to buy the truck for their own use. The SEC’s order also found that Lordstown misrepresented the company’s timeline for delivering the Endurance by failing to account for production delays partially due to Lordstown’s inability to access many critical parts.

“We allege that, in a highly competitive race to deliver the first mass-produced electric pickup truck to the U.S. market, Lordstown oversold true demand for the Endurance,” said Mark Cave, Associate Director of the Division of Enforcement. “Exaggerations that misrepresent a public company’s competitive advantages distort the capital markets and foil investors’ ability to make informed decisions about where to put their money.”

The order finds that Lordstown violated certain antifraud, proxy, and reporting provisions of the federal securities laws. Without admitting or denying the SEC’s findings and subject to bankruptcy court approval, Lordstown agreed to a cease-and-desist order and disgorgement of $25.5 million, which will be deemed satisfied by payments of up to $25.5 million by Lordstown and other defendants to resolve certain pending class actions against them.

The SEC also instituted a related, settled administrative proceeding against Lordstown’s former auditor, Clark Schaefer Hackett and Co. (CSH). CSH provided certain non-audit services, including bookkeeping and financial statement services, to Lordstown during CSH’s audit of the company’s financial statements when it was a private entity. CSH then audited the same financial statements in connection with Lordstown’s merger with the SPAC and thus violated auditor independence standards of the SEC and the Public Company Accounting Oversight Board. Without admitting or denying the SEC’s findings, CSH agreed to a censure, a cease-and-desist order, the payment of more than $80,000 in civil penalties, disgorgement, and interest, and certain undertakings to improve its policies and procedures.

The SEC’s investigation, which is ongoing, was conducted by Carolyn Winters, Mark Oh, and John Higgins, with assistance from David Baddley, Suzanne Romajas, and Peter Lallas, and supervised by Jeff Leasure, Kristen Dieter, Alistaire Bambach, James Carlson, and Mr. Cave.

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