SEC Charges Electric Vehicle Company and Former CEO and CFO for Misconduct Related to Spac Transaction

The Securities and Exchange Commission (SEC) has taken action against Canoo Inc., an electric vehicle company specializing in design and production, along with its former CEO, Ulrich Kranz, and former CFO, Paul Balciunas. The charges are linked to inaccuracies in revenue projections and misconduct concerning undisclosed executive compensation in relation to a special purpose acquisition company (SPAC) transaction.

According to Litigation Release No. 25802 dated August 4, 2023, the SEC has announced resolved charges against Canoo Inc., Ulrich Kranz, and Paul Balciunas. The complaint filed by the SEC in a federal district court in California alleges that between August 2020 and March 2021, during the time when Canoo went public through a SPAC transaction, the company’s public financial projections were materially inaccurate. The projected revenue of $120 million for 2021 and $250 million for 2022, tied to engineering services provision to other companies, was deemed unreasonable as the projects forming the basis of the projections were no longer feasible or active. The complaint also highlights an agreement between Kranz and significant Canoo investors, involving up to $1 million in compensation related to his work at the company, undisclosed to the public. Kranz received over $900,000 from these investors in October 2020. This undisclosed arrangement led to inaccurate executive compensation disclosures by Canoo from September 2020 to April 2021.

Without admitting or denying the allegations, both Kranz and Balciunas have consented to proposed judgments, pending court approval. Kranz will be permanently enjoined from violating the anti-fraud provision of Section 17(a)(3) of the Securities Act of 1933, the proxy solicitation provisions of Section 14(a) of the Securities Exchange Act of 1934, and the associated rules. He will also be barred from aiding and abetting violations of the reporting provisions of Section 13(a) of the Exchange Act, along with related rules. Kranz has additionally agreed to a three-year officer and director bar and will pay a $125,000 civil penalty. Balciunas, on the other hand, will be permanently enjoined from violating Section 14(a) of the Exchange Act and its corresponding rule. He has accepted a two-year officer and director bar, agreed to disgorge $7,500 along with prejudgment interest, and a $50,000 civil penalty.

In a related administrative proceeding, Canoo has settled with the SEC. Without admitting or denying the findings, Canoo has agreed to a cease-and-desist order prohibiting further violations of certain sections of the Securities Act and Exchange Act, alongside their corresponding rules. The company will also pay a civil penalty amounting to $1,500,000.