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Cooper Morgenthau’s financial escapades landed him a three-year prison sentence for embezzling $5 million from three special purpose acquisition companies (SPACs) and using the funds to trade cryptocurrencies and “meme stocks.”
According to an April 27 press release from the United States Department of Justice, Morgenthau was charged with embezzling funds from African Gold Acquisition Corporation (AGAC), Strategic Metals Acquisition Corporation I (SMAC I), and Strategic Metals Acquisition Corporation II between June 2021 and August 2022.
As per a related civil complaint from the U.S. Securities and Exchange Commission (SEC), Morgenthau wired approximately $1.2 million in funds from African Gold to his personal accounts, using the money to trade equities and options of cryptocurrencies and so-called meme stocks. Unfortunately, he lost almost all of the funds in the process.
Following the losses, Morgenthau provided falsified documents to accountants and an auditor at African Gold ahead of its public filing with the SEC, leading to “material misstatements” in the company’s public financial records.
Meanwhile, Morgenthau raised an additional $4.7 million from private investors in a SPAC separate from African Gold. He fraudulently claimed that the money would be used to launch yet another SPAC. However, he used the freshly-raised capital to cover his losses at African Gold and continue further trading of cryptocurrencies and meme stocks.
At the time, SMAC I was in the process of raising money from private investors ahead of its initial public offering.
African Gold discovered the withdrawals in August 2022, fired Morgenthau, and informed the SEC of his malpractice.
Morgenthau, a resident of Florida, pleaded guilty to one count of wire fraud on Jan. 3. He was also ordered to forfeit $5.1 million and pay further restitution of $5.1 million, in addition to serving his prison sentence.
Speaking about the case, U.S. Attorney Damian Williams said:
“With today’s sentencing of Cooper Morgenthau, SPAC promoters have been sent a message that fraud in the SPAC markets will be punished, and greed on Wall Street will be met with serious consequences.”