The former chief financial officer of a special purpose acquisition company (SPAC) has been sentenced to three years in prison after embezzling $5 million to trade cryptocurrencies and “meme stocks.”
Cooper Morgenthau, the former chief financial officer of the African Gold Acquisition Corporation (AGAC), misappropriated more than $5 million from three different SPACs: AGAC, Strategic Metals Acquisition Corporation I (SMAC), according to an April 27 news release from the De part of Justice. I) ) and Strategic Metals Acquisition Corporation II during the period June 2021 through August 2022.
According to a related civil lawsuit by the US Securities and Exchange Commission (SEC), Morgenthau wired approximately $1.2 million in funds from African Gold to his personal account, using the money to trade stocks and cryptocurrency options as well as so-called me me shares. In doing so, he lost almost all of his capital.
After the loss, he then provided falsified documents to African Gold's accountants and auditors ahead of its public filing with the SEC, which resulted in a “material misstatement” of the company's public financial records. Meanwhile, Morgenthau raised $4.7 million from private investors in a SPAC separate from African Gold, arguing the funds would be used to launch another SPAC.
Unfortunately for investors, Morgenthau used the newly raised funds to cover his losses in African Gold and continued to trade cryptocurrencies and meme stocks further. At the time, SMAC I was raising capital from private investors ahead of its IPO. African Gold dis covered the withdrawal in August 2022, fired Morgenthau and notified the SEC of his misconduct. Morgenthau, a Florida resident, pleaded guilty Jan. 3 to one count of wire fraud. In addition to being sentenced to three years in prison, he was also ordered to forfeit $5.1 m illion and pay a further $5.1 million in restitution.
"With today's sentencing of Cooper Morgenthau, SPAC sponsors have received a message that fraud in the SPAC market will be punished and Wall Street greed will suffer severe consequences," US Attorney Damian Williams said in a statement.
