The U.S. Securities and Exchange Commission has charged a Nevada energy corporation and its two chief executives with stock market manipulation and fraud in connection with a $137.5 million stock offering in 2021.
The company, Meta Materials Inc., agreed to settle the charges through a cease-and-desist order issued Tuesday. Civil litigation against the two executives, John Brda of St. Louis and Georgios Palikaras, a Greek citizen and resident of Halifax, Nova Scotia, will proceed in the Southern District of New York, the SEC said.
The case was investigated by Christopher Rogers and Ty Martinez of the SEC’s Fort Worth regional office, under the supervision of Samantha Martin, B. David Fraser and Eric Werner, director of the Fort Worth office.
“The conduct we allege was a sophisticated, yet brazen plan by a public company and its former CEOs to purposely mislead investors in the company’s stock,” Werner said in a written statement. “This conduct is particularly alarming because it involves public company CEOs who were more concerned with ‘burning the shorts’ than creating long-term value for shareholders.”
The SEC’s complaint, filed in the Southern District of New York, alleges that Brda and Palikaras manipulated the market for Meta Materials shares by, among other things, issuing a preferred stock dividend immediately before the offering. The complaint alleges that Brda and Palikaras told certain investors and consultants, and hinted via social media, that the dividend would force short sellers to exit their positions and trigger a “short squeeze” that would artificially raise the price of the company’s common stock.
The SEC further alleges that Brda and Palikaras misrepresented the company’s efforts to sell its oil and gas assets and distribute the proceeds to preferred stockholders, giving investors a false impression of the value of the dividend. While investors held or bought the company’s common stock to receive the dividend, the complaint alleges, the company was cashing in by selling $137.5 million in an at-the-market offering at prices the company, Brda and Palikaras knew were temporarily inflated by their manipulations.
“We have two days,” the complaint alleges Brda told Palikaras after the first day of the offering, “to take advantage of the squeeze. …”
Brda and Palikaras are charged in the civil complaint with violating the antifraud and proxy disclosure provisions of the U.S. securities laws. Brda is additionally accused of aiding and abetting violations by Meta Materials of federal provisions regarding reporting, internal accounting controls and maintenance of books and records.
Brda is represented by Jason Lewis and Jason Hopkins in the Dallas office of DLA Piper.
Palikaras is represented by Jessica B. Magee in the Dallas office of Holland and Knight, and Jasmine S. Chean in the firm’s New York office.
Meta Materials is represented by Caz Hashemi in the Palo Alto, Calif., office of Wilson Sonsini Goodrich & Rosati; Gregory L. Watts in the firm’s Seattle office; Nicholas R. Miller in the firm’s Washington, D.C., office; and J. Ariel Jeong in the firm’s New York office.
According to the settlement of the separate administrative proceeding against Meta Materials, the company was charged with violating the antifraud, reporting, internal accounting controls and books and records provisions of federal securities laws. Without admitting to those violations, Meta Materials agreed to cease and desist from future violations and to pay a $1 million penalty.
The file number of the administrative proceeding against Meta Materials is 3-21976.
The case number of the suit against Brda and Palikaras in the Southern District of New York is 1:24-cv-04806.