By Dean Seal


Meta Materials will pay a $1 million fine to settle the Securities and Exchange Commission's claims that its former chief executives schemed to fraudulently raise $137.5 million from investors.

The federal securities regulator said Tuesday that it is still pursuing civil cases against John Brda and George Palikaras, the two former CEOs alleged to have inflated the company's stock price by issuing a special dividend that they said would trigger a "short squeeze."

Meta Materials neither admits nor denies the SEC's findings but has agreed to pay a $1 million penalty to avoid litigation.

According to the agency, Brda and Palikaras raised $137.5 million in an at-the-market offering in June 2021, just before Brda's Torchlight Energy Resources and Palikaras' Metamaterial merged to form Meta Materials.

The two men issued a preferred stock dividend immediately before the merger and started spreading the word, on social media and beyond, that the dividend would force short sellers to exit their positions on the stock, triggering a "short squeeze" that would drive up the stock's price, according to the SEC.

The pair also lied about the company's efforts to sell off its oil and gas assets and distribute the proceeds of those sales to preferred shareholders, thus misrepresenting the value of the preferred stock dividend, the regulator alleged.

The false promises around the dividend drove investors into the Brda and Palikaras' stock offering, the SEC said, accusing the two men of violating anti-fraud and proxy disclosure provisions of federal securities law. The agency is seeking officer-and-director bars and fines from the two men.

In the months after the Torchlight-Metamaterial merger, Meta Materials disclosed that it had received an SEC subpoena seeking records about the deal. The company said in January that it was working on an agreement with the SEC.

Meta Materials said last October that Palikaras had been removed as president and CEO.


Write to Dean Seal at dean.seal@wsj.com


(END) Dow Jones Newswires

06-25-24 1034ET