The Securities and Exchange Commission (SEC) today filed charges against Meta Materials Inc. and its former CEOs, John Brda and Giorgos Palikaras.
The company agreed to settle the Securities and Exchange Commission’s charges in an administrative proceeding, while the Securities and Exchange Commission’s lawsuit against Brda and Palikaras will proceed to federal district court.
The SEC’s complaint against Brda and Palikaras alleges that, as a result of a concerted scheme to manipulate the market, Meta Materials, a Nevada company based in Dartmouth, Nova Scotia, Canada, raised $137.5 million from investors in a at-the-market (ATM). offer in June 2021 immediately before the merger of Brda’s Torchlight Energy Resources Inc. and Metamaterial Inc. of Palikaras who formed Meta Materials.
The SEC’s complaint, filed in the US District Court for the Southern District of New York, alleges that Brda and Palikaras planned and executed the manipulative scheme that included, among other things, the issuance of a preferred stock dividend immediately prior to the merger.
The complaint alleges that Brda and Palikaras told some investors and advisers — and hinted via social media — that the dividend would force short sellers out of their positions and cause a “short squeeze” that would raise artificially the price of the company’s common stock.
The SEC also alleges that Brda and Palikaras also misrepresented the company’s efforts to sell its oil and gas assets and distribute the proceeds to preferred shareholders, 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 company cashed in by selling $137.5 million in an ATM offering at prices that the company, Brda and Palikaras knew were temporarily inflated by their manipulation plan. “We have two days,” the complaint alleges, Brda told Palikaras after the first day of the ATM offering, “to take advantage of the squeeze…”
The SEC’s complaint charges Brda and Palikara with violating the anti-fraud and proxy disclosure provisions of the federal securities laws and charges Brda with aiding and abetting Meta Materials’ violations of the reporting, internal accounting and bookkeeping provisions and files.
The complaint seeks permanent injunctive relief, officer and director bars and civil penalties from both defendants. The complaint also seeks disgorgement with prejudicial interest from Brda.
The SEC also initiated a separate administrative proceeding against Meta Materials, entering a settled order finding that Meta Materials violated the anti-fraud, reporting, internal accounting controls, and books and records provisions of the federal securities laws. Without admitting or denying the findings, Meta Materials was ordered to cease and desist from violations of the relevant provisions of the federal securities laws and to pay a fine of $1,000,000.
A separate Commission investigation into subsequent events related to Meta Materials (MMTLP) is still ongoing.