The Securities and Alternate Fee sued a self-proclaimed enterprise capitalist for making a “bogus offer” of $200 million to accumulate Richard Branson’s now-defunct Virgin Orbit Holdings Inc.
Matthew Brown “made false and misleading statements and omissions about his investment experience and funds available to make such an offer,” the SEC stated within the lawsuit filed Monday in a federal court docket in Texas. The regulator claimed Brown despatched Virgin Orbit a fabricated screenshot of his firm’s checking account, claiming it held $182 million when in actuality it had a stability of lower than $1.
Brown made the allegedly fictitious provide in March 2023, days after Virgin Orbit paused operations to hunt new funding choices. The corporate had been reeling since a rocket malfunctioned two months earlier, failing to achieve orbit on its first launch out of the UK. The corporate finally filed for chapter.
On March 23, 2023, Brown made an look on CNBC present carrying a Texas Christian College hat and stated he was in remaining discussions on a deal that may give him management of the British billionaire’s struggling satellite tv for pc firm.
“We are in active discussions to inject enough capital to make them cash-flow positive,” stated Brown, 34, who claimed to have invested in 13 house corporations.
The sudden look of this unknown white-knight investor led to a surge in Virgin Orbit shares but in addition prompted information tales that raised questions on Brown.
In its grievance, the SEC accused Brown of deceptive the investing public throughout his tv look as a result of he “falsely portrayed himself as an experienced venture capitalist” and acted like his provide to purchase Virgin Orbit was reputable.
However afterward, Brown failed to answer Virgin Orbit’s due diligence requests and by no means funded the deal, in line with the regulator. Brown additionally demanded, however by no means acquired, a breakup charge from the corporate if the deal didn’t undergo, the SEC stated.
Brown didn’t instantly reply to a request for remark. A spokesperson for Virgin Group declined to remark.
Dan Hart, the previous chief government officer of Virgin Orbit, stated the Brown bid was “an unneeded distraction” when the management crew was “trying to find a path forward for the company.”
“It was a time when we had a number of investment leads popping up as well as sunsetting. And so the adrenaline is just running all the time. And then exhaustion sets in and then another call comes up, and the adrenaline hits. And so that’s kind of what we were living at the time.”
Branson, who has confronted challenges along with his house enterprise enterprise, pumped $1 billion into Virgin Orbit, which was a Virgin Galactic offshoot that aimed to ship small satellites to house on its LauncherOne rocket.
In January 2023, the rocket malfunctioned, inflicting the lack of all 9 satellites on board and dealing a major blow to the corporate. A number of months later, the enterprise was on the verge of collapsing.
On March 15, 2023, Virgin Orbit introduced that it will pause operations whereas it carried out “discussions with potential funding sources.” Nearly every week later, Brown appeared on CNBC to debate his plans to inject $200 million into the corporate. Virgin Orbit’s inventory rebounded as a lot as 74% for its greatest intraday achieve after going through steep declines.
Deal talks shortly fell aside and the inventory plummeted. Virgin Orbit needed to cease operations, filed for chapter and lower 85% of its workers.
The case is SEC v. Brown, 4:24-cv-558, US District Courtroom, Northern District of Texas (Fort Price).
