Control flaws made it possible for the former CFO of African Gold Acquisition Corp. to steal roughly $1.2 million from the SPAC’s operating bank account
African Gold Acquisition Corp., a publicly traded special purpose acquisition company (SPAC), was charged with violations of recordkeeping, reporting, and internal controls, and today the Securities and Exchange Commission (SEC) announced that these charges have been settled against the company.
Due to these shortcomings, the former chief financial officer of African Gold Acquisition Corp. was able to steal approximately $1.2 million from the company’s operating bank account. As a direct consequence of this, African Gold submitted to the Commission materially false filings and maintained inaccurate books and records.
The SEC’s order stated that the only liquid asset owned by African Gold Acquisition Corp. was the cash in its operating bank account, making the possibility of management fraud one of the company’s greatest risks of material misstatement in its financial statements.
According to the order issued by the SEC, in spite of the risk involved, African Gold Acquisition Corp. allegedly gave its former CFO control over virtually all aspects of the company’s operating bank account and the process of producing financial reports, with very little to no oversight.
The court’s ruling claims that by doing this, the CFO was able to steal money from African Gold Acquisition Corp.’s operating bank account without anyone noticing for more than a year and to alter the company‘s bank account statements to hide his fraud.
As a direct consequence of this, the order issued by the SEC states that African Gold Acquisition Corp. materially misrepresented information in a number of required financial filings with the Commission and failed to keep accurate books and records.
African Gold submitted a preliminary proxy statement on February 13, 2023, seeking shareholder approval for a number of proposals, including extending the date of its liquidation from March 2, 2023 to June 2, 2023; permitting African Gold Acquisition Corp. to further extend the liquidation date until March 2, 2024 without requiring another vote from shareholders; and allowing African Gold to do so without incurring additional shareholder costs.
According to John T. Dugan, Associate Director for Enforcement in the Securities and Exchange Commission’s Boston Regional Office, “This settled order with African Gold demonstrates that SPACs must comply with basic requirements of the Exchange Act, just like any other publicly traded company.
The fact that African Gold did not discover the misappropriation of its funds for more than a year, when certain vendors refused to provide further services due to unpaid invoices, is a clear indication that the company neglected to comply with basic requirements for internal control,” said the author of the article.
The order issued by the SEC concludes that African Gold violated Exchange Act provisions relating to recordkeeping, reporting, and internal controls. African Gold did not admit or deny the findings of the SEC; however, the company did agree to a cease-and-desist order and to pay a civil monetary penalty in the amount of $103,591.
Cooper J. Morgenthau, the former Chief Financial Officer of African Gold, was charged with violating multiple provisions of the federal securities laws on January 3, 2023 by the Securities and Exchange Commission (SEC).
These violations included misappropriating money from African Gold’s operating bank account, lying to African Gold’s accountants and auditor, circumventing and/or knowingly failing to implement internal accounting controls, falsifying African Gold’s books and records, and filing false certifications with the Commission.
The investigation was carried out by Anne Hancock, David D’Addio, Ryan Murphy, and Amy Gwiazda of the Boston Regional Office of the Securities and Exchange Commission (SEC), with the assistance of Alex Lefferts and Brian Shute of the Office of Investigative and Market Analytics in the Enforcement Division.
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