SEC Charges CFO Who Allegedly Embezzled Funds And Lost Them To Crypto, Meme Stocks

The U.S. Securities and Exchange Commission (SEC) revealed that a former chief financial officer for bank-check firms pleaded guilty to wire fraud in connection with a scheme to embezzle over $5 million to trade crypto assets and meme stocks.

The financial regulator disclosed the charges on 35-year-old Cooper Morgenthau, the former CFO of African Gold Acquisition Corp, a special purpose acquisition business.

"The Securities and Exchange Commission today announced fraud charges against Cooper J. Morgenthau, the former CFO of African Gold Acquisition Corp., a SPAC or special purpose acquisition company, for orchestrating a scheme in which he stole more than $5 million from the company and from investors in two other SPACs that he incorporated," the SEC said in a Jan. 3 press release.

Morgenthau's scheme, as per SEC, involved the theft of over $5 million, which took place between June 2021 and July 2022. Initially, he allegedly embezzled $1.2 million of funds from African Gold. He then used the funds to cover his expenses and invested some in crypto assets and securities, including meme stocks.

To cover his losses, he allegedly raised $4.7 million using two SPAC series called Strategic Media Acquisition I and II and invested the money in crypto again. His unrestrained spending and poor investing skills made him lose all of the alleged stolen funds by August 2022.

African Gold, which discovered the alleged withdrawals in August 2022, fired Morgenthau and reported his activities to the financial regulator.

"Our complaint against Morgenthau demonstrates our commitment to holding individuals accountable, particularly when they seek to take advantage of public interest in investment vehicles such as SPACs," SEC Boston Regional Office Associate Director John T. Dugan said, noting, "our enforcement team worked swiftly and efficiently to file today's action in just over four months since it was disclosed, which should serve to deter future bad actors in the SPAC market."

The SEC's complaint was filed in the U.S. District Court for the Southern District of New York. It alleged that the 35-year-old executive violated "antifraud provisions of the federal securities laws, lied to African Gold's auditor and accountants in violation of the Securities Exchange Act of 1934, knowingly falsified African Gold's books and records, and filed false certifications with the SEC."

The U.S. Attorney's Office for the Southern District of New York on Wednesday announced criminal charges against Morgenthau, which is being led by Anne Hancock, David D'Addio, Ryan Murphy, and Amy Gwiazda of the Boston Regional Office.

Morgenthau now faces two cases: The US v Morgenthau, 23-cr-2 and the Securities and Exchange Commission v Morgenthau, 23-cv-22.