Christopher Beals and Arden Lee
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26127 / September 25, 2024
Securities and Exchange Commission v. Christopher Beals and Arden Lee, No. 2:24-cv-08215 (C.D. Cal. filed Sept. 24, 2024)
SEC Charges Public Company WM Technology, Inc. and Two Former Senior Executives with Making Negligent Misrepresentations Regarding the “Monthly Active Users” on the Company’s Online Cannabis Marketplace
The Securities and Exchange Commission charged public company WM Technology, Inc. (Nasdaq: MAPS), its former CEO, Christopher Beals, and its former CFO, Arden Lee, for making negligent misrepresentations in WM Technology's public reporting of a self-described key operating metric, the "monthly active users," or "MAU," for WM Technology's online cannabis marketplace.
The SEC's complaint against Beals and Lee alleges that from May 2021 to May 2022, including during a merger with a special purpose acquisition company through which WM Technology became a public company in June 2021, WM Technology misleadingly reported substantial and continued MAU growth and emphasized the strength and expansion of its user base in its public filings and earnings calls. According to the complaint, although WM Technology's SEC filings stated that it determined its MAU by counting the total number of users that had "engaged with" the WM Technology site in a given period, in truth, a large and increasing percentage of the users of the WM Technology site were instead persons who visited a third-party site, and who were then automatically shown the WM Technology site by way of a "pop-under" advertisement. As alleged by the SEC, these purportedly "active" users did not volitionally seek out the WM Technology site, and, in most instances, did not click on any links or engage in measurable activity on the WM Technology site. The SEC's complaint further alleges that despite the publicly reported growth in MAU, WM Technology's user engagement metrics were stagnant or declining. The SEC also alleges that Beals and Lee were repeatedly advised of these declining user trends on the WM Technology site and the fact that these non-engaging users were making up an increasingly large percentage of WM Technology's total MAU, but failed to reasonably follow up and negligently continued to sign WM Technology's SEC filings and make public statements that reported MAU numbers that included non-engaging users when discussing the company's purportedly growing user base.
Without admitting or denying the SEC's allegations, Beals and Lee have each consented to the entry of judgments against them, which are subject to court approval, under which they will be permanently enjoined from violating Sections 17(a)(2) and (a)(3) of the Securities Act of 1933 and Section 14(a) of the Securities Exchange Act of 1934 and Rule 14a-9 thereunder. Beals and Lee have each also consented to three-year officer-and-director bars and to pay civil penalties of $175,000.
The SEC also instituted a related settled administrative proceeding against WM Technology. Without admitting or denying the findings, WM Technology agreed to the entry of a cease-and-desist order prohibiting further violations of Sections 17(a)(2) and (3) of the Securities Act and Sections 13(a) and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, 13a-15(a), and 14a-9 thereunder. WM Technology also agreed to pay a civil penalty of $1,500,000. In determining to accept the settlement of WM Technology, the SEC took into consideration WM Technology's substantial cooperation during the SEC's investigation.
The SEC's investigation was conducted by Christopher Nowlin and supervised by Spencer E. Bendell of the SEC's Los Angeles Regional Office.