The former CFO of a special purpose acquisition company (SPAC) was sentenced to three years in prison after embezzling $5 million that was used to trade cryptocurrencies and “meme stocks.”

An April 27 press release from the Department of Justice (DOJ) said Cooper Morgenthau, the ex-CFO of African Gold Acquisition Corp. (AGAC), embezzled more than $5 million from three different SPACs — AGAC, Strategic Metals Acquisition Corp I (SMAC I) and Strategic Metals Acquisition Corp II (SMAC II) between June 2021 and August 2022.

According to a related civil complaint from the U.S. Securities and Exchange Commission (SEC), Morgenthau wired approximately $1.2 million in funds from African Gold to his own personal accounts where he used the money to trade equities and options of cryptocurrencies and so-called meme stocks.

In doing so, he lost almost all of the funds.

Following the losses, he then provided falsified documents to accountants and an auditor at African Gold ahead of its public filing with the SEC that led to “material misstatements” in the company’s public financial records.

Meanwhile, Morgenthau raised another $4.7 million from private investors in a SPAC separate from African Gold based on the fraudulent claim that the money would be used to launch yet another SPAC.

Unfortunately for the investors, Morgenthau actually used the freshly-raised capital to not only cover his losses at African Gold but to also continue further trading of cryptocurrencies and meme stocks.

At the time, SMAC I was in the process of raising money from private investors ahead of its initial public offering (IPO).

African Gold discovered the withdrawals in August 2022, fired Morgenthau, and informed the SEC of his malpractice.

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Morgenthau, a resident of Florida, pled guilty to one count of wire fraud on Jan. 3. In addition to his three-year prison sentence he was also ordered to forfeit $5.1 million and pay further restitution of $5.1 million.

“With today’s sentencing of Cooper Morgenthau, SPAC promoters have been sent a message that fraud in the SPAC markets will be punished, and greed on Wall Street will be met with serious consequences,” U.S. Attorney Damian Williams said in the statement.

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