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Cantor Fitzgerald, the brokerage led by Donald Trump’s commerce secretary nominee Howard Lutnick, has been sued by the US Securities and Exchange Commission for allegedly making misleading statements to investors in the lead-up to two public offerings that raised $750mn.
The regulator, whose chair Gary Gensler steps down next month to make way for a Trump nominee, charged that the company had “substantive” discussions about possible business targets for their soon-to-be-listed special purpose acquisition companies, while making disclosures to the contrary.
The two Spacs, brought to market in 2020 and 2021, were merged with two companies — View, which makes “smart glass” windows, and Satellogic, which makes earth observation satellites, respectively — both of which Cantor had “commenced negotiations with” before the public listings, the SEC alleged.
The brokerage, one of the biggest dealers of US government debt, agreed to pay a $6.75mn penalty to settle the charges without admitting or denying liability, the agency added.
“Cantor Fitzgerald misled investors about a critical investment consideration by repeatedly stating in public filings that it had not identified or approached any potential merger targets, despite having had substantive discussions with several private companies regarding a potential merger, including with the companies with which its Spacs eventually merged,” said Sanjay Wadhwa, acting director of the SEC’s enforcement division.
“This enforcement action reflects the straightforward proposition that any disclosures about substantive discussions with potential targets must be materially accurate.”
In a statement, Cantor Fitzgerald said: “No investor was ever harmed by the alleged issues described in the order” and that it was “pleased to have concluded this matter”.
Earlier this year, Cantor, Lutnick, and others agreed to pay $12mn to end civil litigation in Delaware challenging the View Spac deal.
Lutnick, a billionaire who has led Cantor for decades, has been one of Trump’s most vocal backers. His support for several of the president-elect’s policies — deregulation, steep tax cuts and tariffs on foreign goods — has cemented his role as a trusted figure in his inner circle.
Before being nominated for commerce secretary, Lutnick was given the role of co-chair of the Trump transition team, giving him influence over crucial positions, including some that oversee cryptocurrency regulation.
The case by the SEC marks its latest broadside against Spacs — instruments that Gensler has claimed have raised investor protection risks. In January it finalised rules that broadened disclosures for such vehicles in a bid to address concerns around conflicts of interest and misleading information.
Gensler is to step down on January 20, the day of Trump’s inauguration. During his term, he has adopted tough enforcement policies as well as a broad rulemaking agenda ranging from climate disclosures to equity market reform.
Trump has nominated former SEC commissioner Paul Atkins to succeed Gensler. If confirmed by the Senate, Atkins is expected to usher in a looser enforcement and rulemaking agenda.
Additional reporting by James Fontanella-Khan
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