The Securities and Exchange Commission has sued a self-described venture capitalist for making a $200 million “sham offer” to acquire Richard Branson’s now-defunct Virgin Orbit Holdings Inc.
Matthew Brown “made false and misleading statements and omissions about his investment experience and the funds available for such an offering,” the SEC said in a lawsuit filed Monday in federal court in Texas. The regulator said Brown sent Virgin Orbit a fabricated screenshot of his company’s bank account, claiming it contained $182 million when it actually had a balance of less than $1.
Brown made the allegedly bogus offer in March 2023, days after Virgin Orbit suspended operations while seeking new financing options. The company was in difficulty after the rocket failed two months earlier and failed to reach orbit on its first launch from the UK. The company eventually filed for bankruptcy.
On March 23, 2023, Brown appeared on CNBC wearing a Texas Christian University cap and said he was in the final stages of negotiating a deal that would give him control of the British billionaire’s struggling satellite company.
“We are in active discussions about injecting enough capital to ensure positive cash flow,” said Brown, 34, who claimed to have invested in 13 space companies.
The sudden emergence of an unknown white knight investor sent Virgin Orbit shares soaring, but also sparked news that raised questions about Brown.
In its complaint, the SEC accused Brown of misleading investors during his television appearances because he “falsely represented himself as an experienced venture capitalist” and acted as if his offer to buy Virgin Orbit was legitimate.
However, Brown subsequently failed to respond to Virgin Orbit’s requests for due diligence and never financed the deal, according to the regulator. Brown also demanded but never received a breakup fee from the company if the deal fell through, the SEC said.
Brown did not immediately respond to a request for comment. A Virgin Group spokesman declined to comment.
Dan Hart, former CEO of Virgin Orbit, said Brown’s proposal was an “unnecessary distraction” as the executive team “tried to find a path forward for the company.”
“It was a time when we had many investment projects appearing and closing. And so the adrenaline just goes off scale all the time. And then fatigue sets in, and then another call rings, and the adrenaline rushes. That’s pretty much how we lived at that time.”
Branson, who was facing problems in his space business, invested $1 billion in Virgin Orbit, a subsidiary of Virgin Galactic that aimed to send small satellites into space on its LauncherOne rocket.
In January 2023, the rocket faulty, which resulted in the loss of all nine satellites on board and dealt the company a significant blow. Within a few months the business was on the verge of collapse.
March 15, 2023, Virgin Orbit. announced that it would pause operations while it held “discussions with potential sources of funding.” Almost a week later, Brown appeared on CNBC to discuss his plans to invest $200 million in the company. Virgin Orbit shares bounced off as much as 74%, the biggest intraday gain since the sharp fall.
Negotiations for a deal quickly fell apart and shares plummeted. Virgin Orbit had to cease operations. filed declared bankruptcy and laid off 85% of its staff.
The case is SEC v. Brown, 4:24-cv-558, U.S. District Court, Northern District of Texas (Fort Worth).