Earlier this week, it was announced that Ault Alliance (NYSEMKT:AULT), a financier and former key shareholder of Mullen Automotive (NASDAQ:MULN), had settled its charges with the U.S. Securities and Exchange Commission (SEC). The SEC alleged that Ault made materially false and misleading statements concerning the performance of its cryptocurrency asset mining business and a $50 million purchase order from a related party controlled by Ault called Avalanche International. The commission also alleged that Ault improperly recorded a $75,000 payment as being used for consulting services. However, it was actually used to reduce then-CEO Milton “Todd” Ault III’s personal debt.
“In addition, AAI failed to make related-person disclosures in 2016-2021, has had long-running internal control weaknesses beginning in June 2017, and engaged in improper accounting related to its investments in warrants of Avalanche during its fiscal years ended 2018 through 2021,” wrote the SEC. “AAI restated its financial statements to correct for its erroneous warrant accounting in amended filings on April 14, 2023.”
The SEC refers to Ault Alliance and its former company names as AAI.
Mullen’s Former Key Shareholder Just Settled Charges With the SEC
AAI, Ault III, and then-CFO and now CEO William Horne agreed to a settlement without admitting to or denying the SEC’s allegations. Ault stated that the charges “do not entail intentional misconduct.” As part of the settlement, Ault will pay a $700,000 civil penalty, which was fully accrued in Q4 of 2022. Ault III will pay a civil penalty of $150,000 and disgorgement of $85,504. Meanwhile, Horne will pay a civil penalty of $20,720. Ault will also hire an independent consultant to review the company’s internal controls.
As of Dec. 31, 2022, Ault owned 71.96 million shares of MULN stock. That’s equivalent to a 4.07% ownership stake. This number has not been adjusted for Mullen’s 1-for-25 and 1-for-9 reverse stock split this year. A 2.33 billion share resale filing dated June 26 showed that Ault would only own 62,908 shares of MULN following the resale.
Ault isn’t the only Mullen financier to have found itself in legal trouble. In March, the SEC charged Terren Peizer and his investment vehicle, Acuitas Group Holdings, with insider trading. Hindenburg Research previously pointed out that Peizer has a business relationship with Michael Wachs, another one of Mullen’s financiers. The short seller noted that Wachs served jail time after he pled guilty to defrauding Chase Manhattan Bank for millions of dollars in 1996.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
