Space Company CEO Mikhail Kokorich Battles SEC to Clear His Name

Posted on 07/18/2021

Momentus Inc. is an early-stage space transportation company. The U.S. government deems space technology to have military applications and the government bars foreign nationals from working on it without a residency permit or export license. Momentus could not secure a license to launch its spacecraft and its founder and former CEO Mikhail Kokorich had his asylum petition denied by the U.S. government. Kokorich is now living in Switzerland.

On July 13, 2021, the Securities and Exchange Commission (SEC) announced charges against special purpose acquisition corporation Stable Road Acquisition Company, its sponsor SRC-NI, its CEO Brian Matthew Kabot (private equity and hedge fund background), the SPAC’s proposed merger target Momentus, and Mikhail Kokorich for misleading claims about Momentus’s technology and about national security risks associated with Kokorich. The SEC’s litigation is proceeding against Kokorich, against whom the SEC filed a complaint in the U.S. District Court for the District of Columbia. All other parties are settling with the SEC, with terms including total penalties of more than US$ 8 million, tailored investor protection undertakings, and the SPAC sponsor’s forfeiture of founder’s shares it stands to receive if the merger, currently scheduled for August 2021, is approved. Stable Road chairman Brian Kabot paid US$ 40,000 personally to settle allegations against him.

Mikhail Kokorich, whose actions are at the heart of SEC’s allegations, didn’t join in the settlement and is fighting the charges.

Momentus emerged from the Y Combinator start-up incubator. Momentus’ new CEO is the former U.S. Defense official John Rood who starts August 1, 2021.

The SEC argues the following in its press release, “According to the SEC’s settled order, Kokorich and Momentus, an early-stage space transportation company, repeatedly told investors that it had “successfully tested” its propulsion technology in space when, in fact, the company’s only in-space test had failed to achieve its primary mission objectives or demonstrate the technology’s commercial viability. The order finds that Momentus and Kokorich also misrepresented the extent to which national security concerns involving Kokorich undermined Momentus’s ability to secure required governmental licenses essential to its operations. In addition, the order finds that Stable Road repeated Momentus’s misleading statements in public filings associated with the proposed merger and failed its due diligence obligations to investors. According to the order, while Stable Road claimed to have conducted extensive due diligence of Momentus, it never reviewed the results of Momentus’s in-space test or received sufficient documents relevant to assessing the national security risks posed by Kokorich. The order finds that Kabot participated in Stable Road’s inadequate due diligence and in filing its inaccurate registration statements and proxy solicitations. The SEC’s complaint against Kokorich includes factual allegations that are consistent with the findings in the order.”

“Momentus’s former CEO is alleged to have engaged in fraud by misrepresenting the viability of the company’s technology and his status as a national security threat, inducing shareholders to approve a merger in which he stood to obtain shares worth upwards of $200 million,” said Anita B. Bandy, Associate Director of the SEC’s Division of Enforcement in a press release. “Our litigation against Kokorich demonstrates our commitment to holding individuals accountable for their statements to investors, which are of particular concern when they are aimed at improperly capitalizing on public interest in popular investment vehicles such as SPACs.”

The Settling Parties

Momentus, Stable Road, and Brian Kabot will pay civil penalties of US$ 7 million, US$ 1 million, and US$ 40,000, respectively. Momentus and Stable Road have also agreed to provide PIPE (private investment in public equity) investors with the right to terminate their subscription agreements prior to the shareholder vote to approve the merger; SRC-NI has agreed to forfeit 250,000 founders’ shares it would otherwise have received upon consummation of the business combination; and Momentus has agreed to undertakings requiring enhancements to its disclosure controls, including the creation of an independent board committee and retention of an internal compliance consultant for a period of two years.

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