The U.S. Securities and Exchange Commission (SEC) on Wednesday said it had settled charges against Akazoo S.A., a Greek firm purporting to be a music streaming business, for $38.8 million after the firm allegedly defrauded investors out of tens of millions of dollars.
Akazoo went public via a special purpose acquisition company (SPAC) in 2019. The SEC froze the firm’s assets a year ago as part of an investigation into claims made by the company.
According to the SEC, Akazoo told investors it was a rapidly growing music streaming company focused on emerging markets with over 38.2 million registered users and $120 million in annual revenue, but in reality, the company had no paying users and negligible revenue.
An attorney for Akazoo, which did not admit or deny the SEC’s findings, declined to comment.
Since late 2020, the SEC has been ratcheting up scrutiny of SPACs, listed shell companies used to take private companies public in a process that a more traditional and lengthy initial public offering. The SEC has issued investor warnings, implemented an enforcement sweep of banks involved in the transactions and has said it is looking at regulatory change.
“The SEC is intently focused on SPAC merger transactions, and we will continue to hold wrongdoers in this space accountable,” David Peavler, Regional Director of the SEC’s Fort Worth Regional Office, said in a statement.
Akazoo agreed to the judgment in April 2021. The settlement, announced on Wednesday, orders Akazoo to disgorge $38.8 million in ill-gotten gains.
The SEC said that total would be satisfied with the company’s payment of $35 million to investors and settlements in connection with several private class action lawsuits.
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