Due to weaknesses in control, the former CFO of the SPAC stole about $1.2 million from its operating bank account.
African Gold Acquisition Corp. charges
African Gold Acquisition Corp., a publicly traded special purpose acquisition company (SPAC), has settled claims of improper internal controls, reporting, and recordkeeping with the Securities and Exchange Commission. Because of these defects, African Gold’s former CFO was able to steal about $1.2 million from the company’s operating bank account. Hence, African Gold’s books and records were faulty, and it made false filings with the Commission.
Based on the SEC‘s ruling, African Gold could only rely on the funds in its operating bank account as a source of liquidity, making the possibility of fraud by management one of the most important threats to the integrity of the company’s financial statements. According to the SEC’s order, African Gold allegedly allowed the former CFO unchecked authority over the company’s operating bank account and financial reporting procedures despite this risk.
The order claims that this allowed the CFO to make personal withdrawals from African Gold’s operating bank account to himself for over a year while also falsifying the company’s bank account statements. According to the SEC’s ruling, African Gold’s failure to maintain correct books and records led to substantial misstatements in a number of required financial reports filed with the Commission.
African Gold requested an extension of its liquidation date from March 2, 2023, to June 2, 2023, in a preliminary proxy statement submitted on February 13, 2023. The company also requested permission to further extend the liquidation date to March 2, 2024, without an additional shareholder vote.
The SEC’s Deputy Director for Enforcement in the Boston Regional Office, John T. Dugan, stated that the SPAC settlement with African Gold proved that SPACs, like any other publicly traded firm, must follow the basic standards of the Exchange Act. The company’s auditors stated that African Gold failed to meet fundamental internal control requirements because “the company did not detect the misuse of its funds for more than a year.
According to the SEC’s decision, African Gold failed to comply with requirements for internal controls, reporting, and recordkeeping under the Exchange Act. African Gold settled for a cease-and-desist order and a $103,591 civil monetary penalty from the SEC without admitting or contesting the agency’s conclusions. Former African Gold Chief Financial Officer Cooper J. Morgenthau was charged by the SEC with multiple counts of securities fraud on January 3, 2023.
The charges stem from Morgenthau’s alleged theft of funds from the company’s operating bank account, as well as his alleged deception of African Gold’s accountants and auditors, circumvention of and/or failure to implement internal accounting controls, falsification of African Gold’s books and records, and filing of false certifications to the Commission.
Anne Hancock, David D’Addio, Ryan Murphy, and Amy Gwiazda of the Boston Regional Office of the Securities and Exchange Commission led the investigation, with help from Alex Lefferts and Brian Shute of the Enforcement Division’s Office of Investigation and Market Analytics.
