3 - 5 minute read
The former CFO of African Gold Acquisition Corp. (AGAC), Cooper Morgenthau, has been sentenced to three years in prison for embezzling over $5 million from three different special purpose acquisition companies (SPACs) between June 2021 and August 2022. According to a press release from the Department of Justice (DOJ), Morgenthau used the stolen funds to trade equities and options of cryptocurrencies and “meme stocks”. The former CFO wired approximately $1.2 million from African Gold to his personal accounts, where he lost almost all of the funds.
Morgenthau then provided falsified documents to accountants and an auditor at African Gold ahead of its public filing with the SEC that led to “material misstatements” in the company’s public financial records. Meanwhile, he raised $4.7 million from private investors in a SPAC separate from African Gold based on the fraudulent claim that the money would be used to launch yet another SPAC. Unfortunately, Morgenthau used the freshly-raised capital to cover his losses at African Gold and to continue trading cryptocurrencies and meme stocks.
African Gold discovered the withdrawals in August 2022, fired Morgenthau, and informed the SEC of his malpractice. Morgenthau pleaded guilty to one count of wire fraud on Jan. 3, and as well as his three-year prison sentence, he was ordered to forfeit $5.1 million and pay further restitution of $5.1 million.
Former chief financial officer of two SPACs sentenced to 36 months in prison for fraud schemehttps://t.co/ZOvi2ksEi1
— US Attorney SDNY (@SDNYnews) April 27, 2023
The case highlights the importance of transparency and ethical practices in the SPAC market. This market has seen tremendous growth in recent years, with companies raising billions of dollars through SPAC IPOs. However, the lack of regulation and oversight has led to concerns about fraud and misconduct.
According to U.S. Attorney Damian Williams, “With today’s sentencing of Cooper Morgenthau, SPAC promoters have been sent a message that fraud in the SPAC markets will be punished, and greed on Wall Street will be met with serious consequences.” This message is particularly important as more companies and investors enter the SPAC market.
Traders should take note of this case and be cautious when investing in SPACs. It is crucial to do thorough research on the company, its management team, and its financials before investing. Additionally, traders should pay attention to any red flags or warning signs, such as a lack of transparency or unusual financial activity.
The Bottom Line: The sentencing of Cooper Morgenthau, the former CFO of African Gold Acquisition Corp., serves as a warning to the SPAC market that fraud and misconduct will not be tolerated. Traders should exercise caution and do their due diligence before investing in SPACs, paying attention to any warning signs of unethical practices.
