Space-transport SPAC Momentus hit with $8 million SEC fine after misleading investors over propulsion technology

FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011.   REUTERS/Jonathan Ernst

  • The SEC announced charges on Tuesday against parties involved in a SPAC deal to take a space-flight company public.
  • A $1.2 billion SPAC deal sought to merge with Momentus, a private start-up working on transporting satellites into space.
  • But a test mission yielded “no data to suggest that that thruster would deliver an impulse of any commercial significance.”
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The SEC on Tuesday announced charges against parties involved in a $1.2 billion space-transport SPAC for defrauding investors and obscuring the CEO’s status as a national security risk.

“This case illustrates risks inherent to SPAC transactions, as those who stand to earn significant profits from a SPAC merger may conduct inadequate due diligence and mislead investors,” said SEC Chair Gary Gensler in a statement.

The SPAC, Stable Road Acquisition Corp, had sought to merge with Momentus, a private start-up, wit the intention of taking it public. Momentus’s key offering was a “microwave electro-thermal water plasma thruster,” a way of zapping water vapor to propel a spacecraft, with the aim of transporting satellites into space.

But Momentus’s propulsion tech failed to show results, according to SEC filings. A test mission fell well short of the company’s own benchmarks, and a former Momentus employee said that the test yielded “no data to suggest that that thruster would deliver an impulse of any commercial significance.”

That didn’t stop the company’s CEO, Mikhail Kokorich, from boasting of its successes.

“Water plasma propulsion is now technologically mature enough to be baselined for operational in-space transportation missions,” he told a trade publication in 2019, citing the Momentus test flight.

Meanwhile, Kokorich, who is a Russian citizen, had caught the eye of US authorities. CFIUS, a government body that scrutinizes foreign investment, flagged Kokorich as a national security threat, denying him permits and requiring him to divest from Momentus.

Kokorich’s work visa was revoked. He applied for political asylum as a Russian dissident, but was denied. When the FBI and other agencies showed up at Momentus HQ to question employees, Kokorich was detained at an immigration detention center, though he was let go on bond.

Little of this was disclosed to investors. Despite Momentus disclosing in filings that it was “highly dependent” on Kokorich personally, he did not reveal his asylum application had been rejected. His presence at the company also prevented Momentus from getting crucial permits approved, according to the SEC.

The SEC is pursuing litigation against Kokorich in federal court, while all other parties have settled for a total penalty of $8 million. The $1.2 billion SPAC deal could still go ahead, though the SEC is requiring that the company let investors pull out freely.

Read the original article on Business Insider