Official plaque on updated building

The U.S. Securities and Exchange Commission has started to crack down on Special Purpose Acquisition Company vehicles in earnest. This comes after several companies involved in mergers were accused of defrauding investors through all sorts of misconduct, including by not limited to misrepresentation, breach of fiduciary duty, accounting fraud, and others.

If you are under investigation for involvement in fraudulent SPAC mergers, it is crucial to have a robust legal defense developed by legal professionals with significant SEC experience. This proactive response may help you avoid some devastating consequences, not least among them being a criminal conviction. If you are in need of counsel, reach out to our widely experienced New York Securities Enforcement attorneys at 212.455.0335 or use our online contact form for a free consultation.

What are SPACs?

Special Purpose Acquisition Company vehicles are often called blank-check companies. These companies go public on the market before their acquisition target is identified, allowing them to find the investors they need to merge with an acquired target.

The SEC has spent a significant amount of attention on SPACs in 2021, with multiple charges and investigations involving several companies and individuals interested in defrauding investors.

How SPACs Defrauded Investors

After SPACs became increasingly popular in 2020, the SEC vowed to take steps to protect investors by implementing proper oversight and penalties where market standards were not in compliance.

Some common investment frauds associated with SPACs include:

  • Misrepresentation
  • Omission
  • Failure to provide due diligence
  • Breach of fiduciary duty
  • Accounting fraud
  • IPO fraud

These are just a few of the ways that investors are defrauded through SPACs. The SEC has recently taken action towards more enforcement efforts against those involved in the fraudulent activities.

These enforcement measures can take a lot of forms and range from administrative procedures to very complex and potentially damaging criminal investigations. One thing is certain, if you believe that you are the target of an investigation for investment fraud related to SPACs, make sure you have legal counsel and a qualified New York regulatory compliance attorney.

What Are The SEC Penalties Following a SPAC Investigation

There are various punishments and ramifications for individuals involved in SPAC investment fraud:

Steep Fines

In one of the SEC’s current SPAC investigations, there was a total settlement of over $8 million in penalties. This amount included the forfeiture of the founder’s shares if the merger was approved.

Forfeit Shares

The SEC sent cease-and-desist orders to companies found to violate securities laws and regulations. These companies as a whole also face substantial civil penalties. The SEC has the power to order any individuals involved to forfeit their shares to the company.

Furthermore, they can force companies to implement new policies and procedures to prohibit and prevent these same types of investment fraud from occurring again.

Get Help From a New York Criminal Defense Lawyer

SPACs can be a generally risky investment venture for any investor in the same way traditional IPOs do. But when you are accused of engaging in activities that directly or indirectly led to defrauding investors, you could face harsh penalties. Not to mention the fact that your professional life will likely be destroyed.

Take steps to clear your name and properly address any issues that arise out of an SEC investigation related to SPAC mergers. Don’t wait until formal charges are filed. Hire a New York criminal defense lawyer with a background in finance law and the acumen to deal with the SEC, Justice Department, and any other entity involved.

Are you facing criminal charges? You could be facing harsh penalties if you are convicted. Make sure you have an aggressive New York criminal defense lawyer protecting your rights.

Schedule your risk-free case review with Protass Law PLLC at 212-455-0335 or complete our secure contact form.