The former CFO of a special purpose acquisition company (SPAC) was sentenced to three years in prison after embezzling $5 million, which he used to trade cryptocurrencies and “meme stocks”.
An April 27 press release from the US Department of Justice said that Cooper Morgenthau, the former CFO of African Gold Acquisition Corporation (AGAC), embezzled more than $5 million from three different SPACs: AGAC, Strategic Metals Acquisition Corporation I (SMAC I), and Strategic Metals Acquisition Corporation II between June 2021 and August of 2022.
Former chief financial officer of two SPACs sentenced to 36 months in prison for fraud scheme https://t.co/ZOvi2ksEi1
— US Attorney SDNY (@SDNYnews) April 27, 2023
The former financial director of two SPACs is sentenced to 36 months in prison for participating in a fraud scheme. https://t.co/ZOvi2ksEi1
According to a related civil lawsuit from the United States Securities and Exchange Commission (SEC), Morgenthau transferred approximately $1.2 million in African Gold funds into his personal accounts, using the money to trade cryptocurrency stocks and options and so-called meme stocks..
In doing so, lost almost all funds.
Following the losses, he provided falsified documents to African Gold accountants and an auditor before his public filing with the SECresulting in “material misstatements” in the company’s public financial records.
Meanwhile, Morgenthau raised another $4.7 million from private investors in a separate SPAC from African Gold, based on the fraudulent claim that the money would be used to launch another SPAC.
Unfortunately for investors, Morgenthau used the newly raised capital to cover his losses in African Gold and continue trading cryptocurrencies and memes.
At the time, SMAC I was in the process of raising money from private investors ahead of its initial public offering..
African Gold discovered the withdrawals in August 2022, fired Morgenthau and informed the SEC of his malpractice.
Morgenthau, a Florida resident, pleaded guilty to one count of wire fraud on January 3. In addition to his three-year prison sentence, he was also ordered to pay $5.1 million and pay additional restitution of $5.1 million..
“With the sentence handed down today against Cooper Morgenthau, The message has been sent to SPAC promoters that fraud in the SPAC markets will be punished, and that greed on Wall Street will face dire consequences,” US Attorney Damian Williams said in the statement..
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