SEC Files $45M Claim Against Lordstown Motors
YOUNGSTOWN, Ohio – The U.S. Securities and Exchange Commission has filed a $45 million claim against bankrupt electric vehicle manufacturer Lordstown Motors Corp. related to “monetary remedies for violations of federal securities law,” the company disclosed in a regulatory filing Tuesday morning.
According to a Lordstown Motors 8-K report, the SEC filed a proof of claim “in the face amount of $45 million” with the U.S. Bankruptcy Court in Delaware on Jan. 4, one day before the Jan. 5 deadline.
“The debtors continue to discuss a potential settlement with the SEC, but to an extent a resolution is not reached, dispute the SEC’s claim,” the filing stated. “Any recovery by the SEC will reduce recoveries to the company’s stockholders, if any.”
The SEC earlier told the court that its “staff has engaged in numerous discussions with the debtors, Creditors’ Committee, Equity Committee and other constituencies to resolve [confirmation] plan issues in this case.”
The SEC wants to be able to pursue charges of securities violations, if warranted, against Lordstown Motors and its executives, and not be restricted by legal discharges that would be confirmed in the reorganization.
The commission filed a motion Dec. 20 that seeks an extension of “time to take action, to the extent necessary, to determine the dischargeability of a debt to a governmental unit.”
In March 2021, Lordstown Motors revealed that the SEC had initiated an inquiry into the company. The commission followed up by launching a formal investigation by issuing two subpoenas for documents and information related to Lordstown Motors’ merger with DiamondPeak Holdings Corp., a blank check company that took Lordstown public in October 2020.
The investigation’s scope also includes information on preorders for the Endurance, the electric pickup truck the company produced.
Short-seller Hindenburg Research published a blistering report March 12, 2021, that questioned the validity of claims made by Lordstown Motors executives that the company had achieved more than 100,000 preorders of the Endurance.
The report alleged that most of those orders were fabricated and that it was unlikely the company had the financial resources to start production of the Endurance. An internal investigation subsequently identified “issues regarding the accuracy of certain statements regarding the company’s preorders,” according to a statement released June 14, 2021.
That same day, Lordstown Motors CEO Steve Burns and CFO Julio Rodriguez resigned from the company. Later that year, Burns began to sell off his stock in Lordstown Motors.
Lordstown Motors filed Chapter 11 bankruptcy June 27, 2023. The EV company once owned and operated out of the former General Motors Lordstown plant. In late 2021, Foxconn purchased the plant and entered into a contract manufacturing agreement with Lordstown Motors to produce the Endurance.
In October, Burns, through his investment company LAS Capital LLC, purchased Lordstown Motors’ assets out of bankruptcy court for $10 million.
A hearing on several matters is scheduled before U.S. Bankruptcy Judge Mary F. Walrath at 3 p.m. Wednesday.
Part of the hearing concerns a “motion of the U.S. Securities and Exchange Commission for Order further extending time to take action, to the extent necessary, to determine the dischargeability of a debt to a governmental unit,” according to court records.
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