The Securities and Exchange Commission (SEC) recently charged a former Chief Financial Officer (CFO) of African Gold Acquisition Corp, Cooper J. Morgenthau, with spearheading a $5 million fraud scheme. The SEC alleges that Morgenthau hid his involvement in a fraudulent scheme to embezzle the company’s funds and invest them in cryptocurrencies. Additionally, the SEC believes that Morgenthau was attempting to capitalize on the volatility of crypto markets and increase his wealth.
According to the SEC document, Morgenthau is accused of using false documents to conceal the movement of funds from African Gold Acquisition Corp’s accounts. As such, Morgenthau is charged with violating several federal securities laws, including fraud, lying to accountants and auditors, and making false filings with the SEC.
In addition to criminal charges, Morgenthau could face civil penalties including forfeiture of the proceeds from his illicit crypto investments and return of any ill-gotten gains to African Gold Acquisition Corp.
According to the SEC report, Morgenthau falsely told investors that their money would finance the said SPAC, whereas the money was being diverted to cover up his embezzlement.
“Our complaint against Morgenthau demonstrates our commitment to holding individuals accountable, particularly when they seek to take advantage of public interest in investment vehicles such as SPACs,” said John T. Dugan, Associate Director for Enforcement in the SEC’s Boston Regional Office. “Our enforcement team worked swiftly and efficiently to file today’s action in just over four months since it was disclosed, which should serve to deter future bad actors in the SPAC market.”
SEC Empowered to Fight Crypto Injustices
The SEC has taken a strong stance against rogue crypto projects following the implosion of FTX and Terra Luna’s UST. While the agency is not interested in banning the industry, investors’ protection from exploitation is a top priority. Furthermore, rug pulls in the crypto market have been rampant in the past year.
Aside from rug pulls, the SEC is focused on crypto companies raising money via coin offerings without proper registration. For instance, The Securities and Exchange Commission (SEC) has brought legal action against Ripple’s CEO, Bradley Garlinghouse, and co-founder Christian Larsen for failing to officially register XRP as security.
This marks yet another example of the SEC’s serious commitment to protecting investors from fraudulent or illegal activities related to cryptocurrencies and digital assets.
With the success of LBRY, which was ruled as a security by the court, the SEC feels empowered to go for more DeFi projects tokens operating like a security.