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- The SEC has filed charges against a Texas man over his offer to invest $200 million in Virgin Orbit.
- The SEC says Matthew Brown claimed to have $182 million but had less than $1 in his bank account.
- Virgin Orbit, which aimed to compete with Elon Musk's SpaceX, went bankrupt in 2023.
In March 2023, beleaguered rocket company Virgin Orbit thought it had found a lifeline.
A Texas-based investor named Matthew Brown reportedly offered to invest $200 million in the rocket firm, which was teetering on the edge of bankruptcy.
But in a complaint filed on Monday, the SEC alleged that the offer was a sham and that Brown had a negative net worth at the time.
The regulator has filed charges that accuse Brown — who it says resides in the Dallas-Fort Worth area of Texas — of engaging in a "fraudulent scheme" to submit and publicly tout a "bogus" $200 million bailout offer for Virgin Orbit, which went bankrupt in April 2023.
Backed by British billionaire Richard Branson, Virgin Orbit had raised millions of dollars to compete with Elon Musk's SpaceX in the private space industry, which the World Economic Forum estimates will be worth $1.8 trillion by 2035.
But the company was left scrambling for funding after a failed rocket launch in January 2023.
In its complaint, the SEC said Brown misrepresented his personal wealth in conversations with Virgin Orbit, including sending a fabricated screenshot of his company's bank account with a balance of over $182 million, when the actual balance was less than $1.
Brown also appeared on CNBC shortly after entering into discussions with Virgin Orbit despite signing an NDA.
He told the channel he planned to close the deal "in the next 24 hours," and he would "basically be the owner" of Virgin Orbit as a result of the investment, according to the complaint.
The SEC says that Brown also told Virgin Orbit that he had graduated from Southern Methodist University in Dallas with a law degree. "Brown had never graduated from college, let alone attended law school," the SEC wrote.
When Brown's offer leaked to the media, shares in Virgin Orbit went up by over 33%.
The SEC said that the deal collapsed after Brown attempted to request the inclusion of a "break up fee" if the transaction did not close and refused to respond to Virgin Orbit's due diligence inquiries.
The company, once valued at $3.7 billion, filed for bankruptcy less than a month later.
The SEC seeks a civil fine for Brown and a permanent ban on purchasing or selling securities.
A representative for Brown and his business, Matthew Brown Companies, told Business Insider in a statement after this story's publication: "We are steadfast in our commitment to thoroughly contest these issues, if they arise, through the trial process. Our stance in this civil lawsuit is firm: We will not settle until we are vindicated by the rule of law."
The representative alleged that the SEC complaint contained errors and fabrications and that there were conflicts of interest involving SEC investigators.
The SEC did not respond to BI's request for comment, made outside normal working hours, about the representative's allegations.
June 20, 2024: This story was updated to include a statement from a representative for Brown and his companies.