SEC Charges Meta Materials and Former CEOs with "Sophisticated, Yet Brazen" Plan to Mislead

SEC Charges Former CEOs of Meta Materials with Market Manipulation, Fraud, and Other Violations

The Securities and Exchange Commission today charged John Brda and Georgios Palikaras, former CEOs of Meta Materials Inc., for their roles in a concerted market manipulation scheme that raised $137.5 million from investors in an at-the-market (ATM) offering in June 2021 immediately prior to the merger of Brda’s Torchlight Energy Resources Inc. and Palikaras’ Metamaterials Inc. that formed Meta Materials.

The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that Brda and Palikaras planned and conducted the manipulative scheme that included, among other things, issuing a preferred stock dividend immediately before the merger. The complaint alleges that Brda and Palikaras told certain investors and consultants—and hinted via social media—that the dividend would force short sellers to exit their positions and trigger a “short squeeze” that would artificially raise the price of the company’s common stock. The SEC further alleges that Brda and Palikaras also misrepresented the company’s efforts to sell its oil and gas assets and distribute proceeds to preferred stockholders, giving investors a false impression of the value of the dividend. While investors held or bought the company’s common stock to receive the dividend, the complaint alleges, the company was cashing in by selling $137.5 million in an ATM offering at prices that the company, Brda, and Palikaras knew were temporarily inflated by their manipulative scheme. “We have two days,” the complaint alleges Brda told Palikaras after the first day of the ATM offering, “to take advantage of the squeeze…”

Ex-SEC Chair Calls on Congress to Lead Climate Policymaking

Climate change policymaking matters are best left to Congress rather than the SEC, former agency Chairman Jay Clayton said Tuesday during a US Chamber of Commerce event.

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Lawmakers abdicated responsibility by asking the SEC to tackle climate issues, said Clayton, who served during the Trump administration. Sen. Elizabeth Warren of Massachusetts and other Democrats had urged the SEC to require companies to disclose their risk from climate change before the agency issued its rules in March, saying the regulator has the power to act.

“Stay in your lane,” Clayton said, referring to the SEC. “Congress should do its job.”

Hunterbrook

A third model that Hunterbrook has emphasized is that it could trade commodities based on its reporting. The form is something like: You hire the only foreign correspondent in a faraway country that is the leading producer of unobtainium, she learns that a coup is in the offing and the new military junta will ban unobtainium exports, you go long unobtainium futures, you publish her story, the price of unobtainium spikes, you profit.

This strikes me as a pretty good model, when you put it like that, but how often are your crack reporters really going to get advance notice of market-moving coups in commodity-exporting countries? If you could industrialize that it would be pretty cool, for you, but pretty bad, for the commodity-exporting countries. Your investor letter would be like “we had a great quarter, driven by continuing strong coup activity.”

Anyway Hunterbrook’s latest report yesterday isn’t quite that, but it does begin with a secret flight that might disrupt nickel supplies….

How law firm Robbins Geller won $434 mln post-dismissal settlement with Under Armour

Does the outcome of a securities class action hinge on which shareholder firm is handling the case?

Not most of the time, according to the latest draft of an article for the NYU Law & Economics Research Paper Series.

In Paying for Performance? Attorneys Fees in Securities Fraud Class Actions, law professors Adam Pritchard of the University of Michigan, Stephen Choi of New York University and Jessica Erickson of the University of Richmond analyzed outcomes in nearly 2,500 securities class actions filed between 2005 and 2018 to find out if 15 top-tier shareholder firms — defined as law firms whose settlement averages exceeded $30 million — obtained better results for shareholders.

After controlling for the quality of the cases by considering objective factors such as parallel government investigations, accounting restatements and competition for appointment as lead plaintiff, the study authors found that top-tier firms pour vastly more time and money into their cases — but don’t achieve markedly different results in most of them.

Why Neil Phillips Avoided Prison: Morgan Stanley Was Victim

Manhattan federal prosecutors had asked for a two-year prison sentence for Phillips, who was convicted in October of directing $700 million in trades aimed at manipulating the value of the South African rand to 12.50 against the US dollar. That was the barrier rate at which a $20 million option he bought from Morgan Stanley would pay out.

But US District Judge Lewis Liman on Tuesday instead sentenced Phillips, 53, to two years of probation and the one month he already served in a Spanish jail after his 2022 arrest. In explaining his decision, the judge said the parties in the case were all sophisticated participants in the unregulated foreign exchange spot market who knew the risks involved.

Morgan Stanley “is hardly the kind of unsuspecting victim” on whose behalf the government usually brings charges, Liman said. He noted that the bank could have taken other measures to protect against its risk from the option and didn’t request restitution from Phillips.