Space Company CEO Allegedly Resorts to Fraud to Clear His Name

The US Securities and Exchange Commission (SEC) settled fraud allegations against a space startup, Momentus and the special purpose acquisition company (SPAC), Stable Road, that wanted to take Momentus public last year. The combined sum of penalties both companies will need to pay has reached $8 million.

The settlement is based on looser financial regulations of SPAC transactions in contrast to traditional IPOs. Since SPACs have looser disclosure rules, there is a risk that potential investors may not get all the information they were entitled to under IPO deals.

Space Company CEO Mikhail Kokorich

According to SEC Chair Gary Gensler, this case is a vivid example of how risky and misleading SPAC transactions can be for investors. He stressed that SPAC companies reap their benefits in profits while putting investors at risk.

Brian Kabot, a chairman at Stable Road, personally paid $40,000 to settle fraud allegations against him. At the same time, Momentus founder and former Mikhail Kokorich chose to fight the SEC decision-even though his actions drew close attention from the government and resulted in the SEC case.

Kokorich gave several interviews to Quartz after the platform reached out to the entrepreneur to hear his side of the story. In the first interview, he denied hiding any vital information from Momentus investors. He added that payout from the purchase went to establish another space startup in Switzerland.

Did Kokorich Mikhail Momentus Space Investors Know About CEO’s Immigration Status?

The chief development of Momentus Space is an Orbital Transfer Vehicle (OTV), designed to launch on a larger rocket and then ferry small satellites to their calculated orbits. The OTV runs on a proprietary propulsion system designed by Mikhail Kokorich.

The entrepreneur has a physics degree from Novosibirsk State University in Russia. He moved to the USA in 2014 and founded Momentus Space three years later. In 2019, the company went public via a SPAC deal valued at $1.9 billion.

As of August 1, Momentus has appointed a new CEO – former US Defense official John Rood. Before that, the position belonged to the company founder.

The US legislation became the primary reason for Kokorich’s resignation as the company leader. According to the US government, any space technology has military uses, and foreign nationals cannot work on it unless they have a residency permit and export license.

Right after the public acquisition was announced, the authorities started an investigation of Kokorich’s immigration status. The founder was forced to resign from his CEO position because Momentus could not secure a license for its spacecraft. Kokorich was also forced to divest some of his company shares to secure Momentus’s viability.

The scenario is not new for the Russian native as he already had to leave another space company he founded, Astra Digital, over the same security concerns.

On meeting the investors, Kokorich informed them that he was seeking an export license and asylum to continue doing his job.

But according to the SEC, Mikhail Kokorich had filed an asylum petition that was denied before, so he knew that the asylum plan would not work. In 2019, when the federal agents raided the company and arrested Kokorich, who was later released on bond.

Still, these facts have not prevented Mikhail Kokorich from stating in his interviews with Quartz that all investors had complete information about his asylum and export license applications.

According to him, both issues were listed in the company filings. He added that he never instructed his lawyers to hide any information pertaining to these issues and that everything was properly documented in the S4 draft.

SEC disagrees, stating that Kokorich was fully aware that he had been sent to the immigration court for the removal procedure. The entrepreneur paired, stating that applying for asylum through an immigration court is a common practice. He also adds that he was officially authorized to work as Momentus CEO at the time of the transaction.

Did Mikhail Kokorich Reveal All About His Technology?

Another allegation Mikhail Kokorich will have to answer for is misleading information about the Momentus technology test. The test was supposed to prove that the OTV propulsion system can generate enough thrust for maneuvers and satellite deployment.

According to the company statements, the test was successfully conducted, but according to the SEC, it ended in a failure and even led to the creation of an internal failure board. Out of a hundred total planned firings, Momentus only carried out 23.

After that, the spacecraft lost contact with the satellite. Besides, only three firings produced enough plasma to take OTV to space. SEC regulators believe that Kokorich had full knowledge of test failures and was obliged to inform investors about technology unviability.

Mikhail Kokorich once again denies all claims about unsuccessful firing tests. According to him, the entire propulsion system is successful and the thrusters as the whole, including tanks, coaxial cable, vaporizers, and other crucial units, work properly. He claims that if any of the elements in this complex system failed, Momentus would not be able to fire at all.

Kokorich also adds that the only things that failed during the tests were onboard computers designed by another company. He states that the failure review board was created to deal with the avionics problems – namely, with the onboard computer on a satellite bus.

Following the board investigation of the failures, Momentus decided to create onboard avionics in-house. This means that by the time of drafting S4, no faulty computers were onboard the Momentus satellite bus.

What’s Next for Mikhail Kokorich?

At the moment, Mikhail Kokorich lives in Switzerland and claims to have received a residency permit within two months upon arriving. When asked if he is going to attend the US trial, Kokorich stressed that he has no active US visa so that would be problematic.

He adds that he left the country voluntarily, abandoning his asylum process. At the same time, Kokorich points out that he is ready to fight allegations against him “in any possible way.”

His brainchild, Momentus Space, is further pursuing its plans of going public. For this, the company will need the majority of Stable Road shareholders to approve the SPAC deal. According to the company’s interim CEO Dawn Harms, the company is looking forward to closing this chapter and moving forward.

Harms stresses that the entire team is committed to building a lasting partnership with the US government, stockholders, and customers. Ms. Harms adds that the company is ready to demonstrate its value and hopes that the future of Momentus is bright.

If the Momentus SPAC deal is approved, Mikhail Kokorich and other Russian stakeholders divested from the startup will need to pay $50 million in fines. However, the company does not disclose if anyone is willing to contest this decision.

Kokorich states that it would be more proper if he received the payout for the company he created. At the same time, he points out that he has already been ousted from another space company he built – Astra Digital – without any moral or financial compensation.

Right now, Mikhail Kokorich is building yet another space startup – this time, in Switzerland. The new project, called Destinus, will be developing technology for near-space vehicles, something of a hybrid between a plane and a rocket. The carriers will be used for express cargo delivery between continents and should take around an hour and a half to complete the trip.

Kokorich also adds that the US authorities misunderstood his intentions and lost a viable economic opportunity. He wrote that he understands why US officials are cautious about foreign investors, especially Russian and Chinese.

At the same time, he points out that the policy was wrongly applied to him. According to Mikhail Kokorich, he could have become the next Sikorsky for the US industry if only the officials believed the honesty of his intentions.

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Nitin Maheta

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