Bankrupt EV startup Lordstown Motors could be on the hook for $45 million for violating federal securities laws.
The Securities and Exchange Commission filed a claim for that amount in Lordstown Motors’ Chapter 11 bankruptcy proceedings last week, though the startup says it is still engaged in settlement talks with the agency. If the SEC moves forward, it would be the biggest penalty for an EV startup since hydrogen trucking company Nikola settled its own case for $125 million in 2021. It also could put Lordstown’s creditors at risk, according to the company.
The claim against Lordstown is the latest sign that the SEC’s myriad investigations into electric vehicle startups are coming to fruition as it announced a host of settlements and penalties in the space in 2023.
The SEC first started probing Lordstown Motors in 2021, just days after short-selling research firm Hindenburg Research published a report laying out a number of allegations of fraud. One of Hindenburg’s central claims was that Lordstown had lied to investors about the number of preorders it had secured for its electric pickup truck.
Lordstown performed its own internal probe and ultimately decided that certain executives did make misleading claims, which prompted CEO and founder Steve Burns (as well as CFO Julio Rodriguez) to resign. But the SEC pushed on, issuing subpoenas along the way and continuing to investigate the startup’s actions.
Lordstown struggled to recover after this, and had to strike a deal with iPhone-maker Foxconn to sell the manufacturing plant it had bought from General Motors in Ohio. The startup tapped the Taiwanese manufacturer to build its pickup, but only a few were ever shipped before Lordstown Motors filed for Chapter 11 bankruptcy protection and suing Foxconn in June 2023.
Lawyers for Lordstown Motors revealed early on in the bankruptcy process that it had held confidential settlement talks with the SEC. As those talks continued through the end of 2023, they started to bump up against the bankruptcy proceeding’s deadline for creditors to finalize their claims against the startup. Lordstown and the SEC requested — and were granted — two different delays in order to “continue discussions in a productive manner,” filings show. The SEC ultimately filed this claim on January 4, one day before the revised deadline, seeking “[m]onetary remedies for violations of federal securities laws.”
In a regulatory filing this week, Lordstown Motors said that “[a]ny recovery by the SEC will reduce recoveries to the Company’s stockholders,” and that if it cannot reach a resolution with the agency, it will dispute the $45 million claim. Lordstown Motors and a lawyer for the SEC did not immediately respond to requests for comment.
The SEC spent the last few years investigating almost every electric vehicle startup that went public in the wave of SPAC mergers that shook up the industry, and even a few that didn’t. It wrapped up many of them last year.
Hydrogen trucking company Hyzon paid a $25 million penalty after the SEC discovered, among other things, the startup said it sold 87 vehicles in 2021 when it actually sold none. Spruce Power (formerly XL Fleet), a maker of hybrid powertrains, paid an $11 million penalty as a result of promoting sales projections during the merger process of over $1 billion that the SEC found to be misleading. EV startup Canoo paid a $1.5 million penalty as part of a settlement with the agency, and two of its former executives were separately charged as well.
Some investigations — like the one into Lucid Motors, or struggling EV startup Workhorse — have been dropped without any enforcement action. The SEC also never announced a resolution to its probe into Electric Last Mile Solutions, which filed for bankruptcy in 2022. One of the only investigations remaining is the one into Faraday Future, which the SEC has been probing since March 2022.