The former CEO of a special purpose acquisition company (SPAC) pled guilty to securities fraud in connection with a scheme to mislead investors by falsely inflating the revenue of a target company, enabling the SPAC to complete an acquisition before a deadline that would have required it to dissolve and return capital to investors.
Last week, the U.S. Securities and Exchange Commission (SEC) charged the former CEO of a SPAC, Trident Acquisitions Corp., Vadim Komissarov, along with several executives at an online lottery company, Lottery.com Inc., alleging that they engaged in a scheme to falsify the lottery company’s revenues to make it look like an attractive acquisition target.
At the time, Lottery.com was struggling to generate revenue and Trident was facing a deadline to make an acquisition, otherwise it would have to be dissolved and return the US$60 million that it had raised from investors as a shell company. The SEC alleged that the executives conspired to boost the lottery company’s revenues so that Trident could sell investors on acquiring the company.
According to court filings, starting in 2020 through May 2022, the executives engaged in a series of sham transactions to make it appear as though Lottery.com was generating revenue, and those false numbers were reported to the SEC, and disclosed to Trident shareholders in order to win their approval for the acquisition.
U.S. authorities alleged that Komissarov then sold 300,000 shares of Lottery.com, before the company disclosed to investors that its revenues were overstated.
Now, Komissarov has pled guilty to one count of securities fraud for his role in the scheme. He is due to be sentenced on June 24.
“Vadim Komissarov, the former CEO of Trident Acquisitions Corp., defrauded his shareholders. He manufactured fraudulent revenue and then obstructed the SEC’s investigation, including by lying under oath,” said Jay Clayton, U.S. attorney for the Southern District of New York, in a release.
Previously, without denying the SEC’s allegations, two of the Lottery.com executives consented to the entry of court judgements banning them from serving as public company officers or directors and requiring them to pay disgorgement and civil penalties that will be determined by the court.