U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25802 / August 4, 2023
Securities and Exchange Commission v. Ulrich Kranz and Paul Balciunas, No. 23-cv-06332 (C.D. Cal. filed Aug. 4, 2023)
SEC Charges Electric Vehicle Company and Former CEO and CFO for Misconduct Related to Spac Transaction
The Securities and Exchange Commission today announced settled charges against Canoo Inc., a company that designs and produces electric vehicles, its former Chief Executive Officer, Ulrich Kranz, and its former Chief Financial Officer, Paul Balciunas, for making inaccurate revenue projections. The SEC also charged Canoo and Kranz with misconduct related to nearly $1 million in undisclosed executive compensation.
The SEC's complaint against Kranz and Balciunas, filed in federal district court in California, alleges that from August 2020 until March 2021, during which time Canoo became publicly listed through a transaction with a special purpose acquisition company (SPAC), Canoo's public financial projections were materially inaccurate. According to the complaint, Canoo projected revenue of $120 million for 2021 and $250 million for 2022, in connection with the provision of engineering services to other companies; these projections were allegedly unreasonable because, as Kranz and Balciunas should have known, the two projects on which Canoo based nearly all of its projected revenue were no longer active or feasible. The complaint further alleges that in November 2019, Kranz entered into an agreement with two individuals who were significant investors in Canoo to receive up to $1 million in compensation related to his work at Canoo, and in October 2020, Kranz received over $900,000 from these two individuals. According to the complaint, this undisclosed arrangement caused Canoo to make inaccurate executive compensation disclosures from September 2020 until April 2021.
Without admitting or denying the SEC's allegations, Kranz and Balciunas have each consented to the entry of judgments against them, which are subject to court approval. Kranz agreed to be permanently enjoined from violating the anti-fraud provision of Section 17(a)(3) of the Securities Act of 1933 and the proxy solicitation provisions of Section 14(a) of the Securities Exchange Act of 1934 and Rules 14a-3 and 14a-9 thereunder, as well as from aiding and abetting violations of the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-11 thereunder. Kranz also consented to a three-year officer and director bar and payment of a $125,000 civil penalty. Balciunas agreed to be permanently enjoined from violating Section 14(a) of the Exchange Act and Rule 14a-3 thereunder, as well as from aiding and abetting violations of Section 13(a) of the Exchange Act and Rule 13a-11 thereunder. Balciunas further consented to a two-year officer and director bar, payment of $7,500 in disgorgement and prejudgment interest, and a $50,000 civil penalty.
The SEC also instituted a related settled administrative proceeding against Canoo. Without admitting or denying the findings, Canoo agreed to the entry of a cease-and-desist order prohibiting further violations of Sections 17(a)(2) and (3) of the Securities Act, Sections 13(a) and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 14a-3 and 14a-9 thereunder. Canoo also agreed to pay a civil penalty of $1,500,000.
The SEC's investigation was conducted by John Dwyer and Anne Romero, with the assistance of Christopher Martin and Gregory Kasper, and was supervised by Danielle R. Voorhees, Nicholas P. Heinke, and Jason J. Burt, all of the SEC's Denver Regional Office.