SEC Charges Defendant with Fraud for Bogus Offer to Invest $200 Million in Virgin Orbit

SEC Charges Texas Resident with Submitting Bogus Offer to Invest $200 million in Virgin Orbit

The Securities and Exchange Commission today charged Dallas-Fort Worth resident Matthew Brown and his company, Matthew Brown Companies, LLC, for engaging in a fraudulent scheme to submit and publicly tout a bogus offer to invest $200 million in Virgin Orbit Holdings, Inc. (“Virgin Orbit”), formerly a public company listed on Nasdaq under the ticker symbol VORB.

According to the SEC’s complaint, on March 19, 2023, Brown submitted an unsolicited investment offer as Virgin Orbit was teetering on the brink of bankruptcy. Brown told Virgin Orbit’s CEO that he had previously invested hundreds of millions of dollars of his “personal capital,” primarily in space companies. To convince Virgin Orbit that his offer was legitimate, the SEC alleges that Brown sent Virgin Orbit a fabricated screenshot of his company’s bank account purporting to show a balance of over $182 million dollars. The SEC alleges that the bank account actually had less than $1. In addition, the SEC claims that Brown told Virgin Orbit that he held a law degree from Dallas-based Southern Methodist University, when in fact Brown had never graduated from college.

Supreme Court Agrees to Take Up Nvidia Securities Suit On Pleading Standards Issues

While I am sure the plaintiffs are griped that the Court granted cert in this case, the company did make a valid point that it would create quite a mess in the securities litigation arena if there were to be a split between the Second and the Ninth circuits on issues as important as pleading scienter and falsity. The company correctly pointed out in its petition that in fact most of the securities litigation that is filed is filed in either the Second or Ninth Circuits. Diverging views on key securities issues between these two circuits could be quite disruptive and presents the prospect of diverging outcomes in similar cases simply because of the circuit in which the case was filed.

Indeed, in a particularly interesting aspect of the pleadings filed in connection with the company’s petition, Stanford Law Professor Joseph Grundfest, in an amicus brief filed in support of the company’s petition, argued that a statistical analysis is possible to support the court’s consideration of whether a split between the circuits in sufficiently important to warrant the Court’s review of a question. Grundfest argued that given the Second and Ninth Circuit’s “market share” predominance in securities litigation, the split between the two Circuits on the questions here particularly justified the Court’s taking up the case.

Tesla to Texas

But Elon Musk is different. Elon Musk is constantly pushing the boundaries of the securities laws, but in complicated ways that are arguably allowed. He’s not running around doing funny frauds; he’s running around tweeting ambiguous winking things. And he is maximally aggressive, and hires maximally aggressive lawyers, and is politically influential. So Musk will do some weird thing, and people will go to the SEC being like “isn’t this illegal,” and the SEC will mutter “I mean we think so,” but if they actually bring a case about it it will cost a lot of time and money and be very grinding and unpleasant, and the legal arguments will be difficult and novel, and they might lose, and also everyone who works on the case will be blackballed from all the law firms that Elon Musk uses. It’s a mess.

But not bringing the case is also very unsatisfying: It sets bad precedents, undermines the SEC’s regulatory program, and leads to people like me going around saying “why on earth did Elon Musk get away with obviously violating the disclosure rules when he bought Twitter?” The SEC cannot solve the Elon Musk problem by ignoring him, because he keeps doing stuff.

William H. Donaldson, Wall St. Lion Who Led the S.E.C., Dies at 93

… President George W. Bush appointed him chairman of the S.E.C. in 2003.

The commission was under fire at the time for appearing too lax in its watchdog role. After the stock market boom of the late 1990s, Americans were stunned and angered to learn that the energy firm Enron and telecommunication-services provider WorldCom had used accounting trickery to inflate their reported profits. Congress was determined to crack down and authorized a bigger budget for the S.E.C.

Mr. Donaldson, a moderate Republican, often sided with Democratic commissioners rather than those of his own party when voting on new regulations. Republicans and business groups said some of his ideas, such as imposing tighter regulation on hedge funds, would raise costs needlessly. Faced with this backlash among the commissioners, he announced his resignation in June 2005, a little over two years after his arrival.

‘Hot-tubbing’ and more. New terms in Black’s Law Dictionary

Here are some newly added terms that caught my eye.

Hot-tubbing.

Sure, you could say “witness conferencing” or “concurrent expert evidence hearings” to mean the same thing, but where’s the fun in that? Black’s says it is “the practice of having expert witnesses testify as a panel rather than one by one, answering questions in each other’s presence.”

The term to me invokes images of fully-clothed middle-aged academics soaking in a tub and having a spirited debate about, say, whether a reasonable alternative design could have been employed to avoid a product failure.

Here’s another one: crimmigration. Joining the likes of “glamping,” “chillax” and “bromance,” the legal profession now has “crimmigration.”

“The confluence of immigration law and criminal law; specif., a body of law that determines whether a criminal conviction renders a noncitizen inadmissible or removable from the United States under immigration law, ineligible for relief or protection from removal, or ineligible for naturalization.”