On 12 December 2024, the United States Securities and Exchange Commission imposed a cease and desist order against Cantor Fitzgerald, L.P., a global financial services firm, for causing materially misleading disclosures by two special purpose acquisition companies (SPACs) it controlled. The US SEC found that Cantor Fitzgerald misled investors about discussions with potential merger targets, violating federal securities laws. The firm has agreed to pay a $6.75 million civil penalty as part of a settlement.
Cantor Fitzgerald was charged with causing two SPACs, CF Finance Acquisition Corp. II (CFAC II) and CF Acquisition Corp. V (CFAC V), to deny substantive discussions with potential merger targets before their respective IPOs. The US SEC’s investigation revealed that Cantor had indeed engaged in pre-IPO negotiations with potential targets, including View, Inc. and Satellogic Inc., which later became the merger partners of the SPACs.
These misleading statements, contained in public filings such as Form S-1 registrations, final prospectuses, and proxy statements, obscured the true extent of Cantor’s involvement in pre-IPO negotiations.
Cantor Fitzgerald, a Delaware limited partnership headquartered in New York, is a global financial services firm with extensive involvement in SPAC sponsorship. Through its subsidiaries, Cantor has launched nine SPACs since 2018. Cantor controlled the activities of its SPACs, from identifying potential targets to executing agreements and filing regulatory disclosures.
The two SPACs involved in this case were CFAC II, which raised US$500 million in an IPO in August 2020, and CFAC V, which raised US$250 million in an IPO in January 2021. Both SPACs later merged with private companies i.e. CFAC II with View, Inc., and CFAC V with Satellogic Inc., after protracted discussions initiated before their respective IPOs.
In 2020, Cantor executives held pre-IPO discussions with View, Inc. about a potential merger through CFAC II. These talks included accessing View’s data room, exchanging diligence materials, and holding multiple meetings. Despite this activity, CFAC II’s IPO filings in August 2020 falsely stated that no substantive discussions with potential targets had occurred. CFAC II eventually announced its merger with View in November 2020, finalising the deal in March 2021.
Similarly, in late 2020 and early 2021, Cantor held substantive discussions with Satellogic Inc. and other targets on behalf of CFAC V before its IPO in January 2021. These discussions involved financial presentations, draft letters of intent, and direct negotiations about potential mergers. Yet, CFAC V’s IPO filings denied any such pre-IPO activities. CFAC V later announced its merger with Satellogic in July 2021, completing the transaction in January 2022.
The US SEC found Cantor caused CFAC II and CFAC V to violate Sections 17(a)(2) and 17(a)(3) of the United States Securities Act of 1933, which prohibit obtaining money through false or misleading statements. Additionally, Cantor violated Section 14(a) of the United States Securities Exchange Act of 1934 and Rule 14a-3, which require accurate disclosures in proxy materials.
Without admitting or denying the findings, Cantor Fitzgerald agreed to cease further violations and pay a US$6.75 million civil penalty. The penalty may be distributed to affected investors if the US SEC decides to establish a Fair Fund. The investigation was conducted by US SEC officials Eugene Bull, Rebecca Schendel Norris, and Gargi Chaudhuri, and it was supervised by Laura B. Josephs.
(Source: https://www.sec.gov/files/litigation/admin/2024/33-11339.pdf, https://www.sec.gov/newsroom/press-releases/2024-199)
