12:31 PM EDT, 06/25/2024 (MT Newswires) -- (Updates with posts on X from Brda and Palikaras starting in 10th paragraph.)

Meta Materials ( MMAT ) and two former chief executive officers, John Brda and George Palikaras, face charges of market manipulation and fraud from the US Securities and Exchange Commission, the agency said Tuesday.

Meta Materials ( MMAT ) agreed to settle the charges in an administrative proceeding, while the litigation against Brda and Palikaras will proceed in the US District Court for the Southern District of New York, the SEC said in a statement.

In an administrative proceeding against the company, Meta Materials ( MMAT ) was ordered to cease and desist from violations of securities laws and to pay a $1 million fine, the SEC said. The company didn't admit or deny the findings, the agency said.

The SEC complaint against Brda and Palikaras alleges that under a market manipulation scheme, Meta Materials ( MMAT ) raised $137.5 million in an offering in June 2021 before the merger of Brda's Torchlight Energy Resources and Palikaras' Metamaterial that created Meta Materials ( MMAT ).

The complaint alleges Brda and Palikaras planned a "manipulative scheme that included, among other things, issuing a preferred stock dividend immediately before the merger."

"Brda and Palikaras told certain investors and consultants -- and hinted via social media -- that the dividend would force short sellers to exit their positions and trigger a 'short squeeze' that would artificially raise the price of the company's common stock," the SEC said.

The SEC is also alleging Brda and Palikaras "misrepresented the company's efforts to sell its oil and gas assets and distribute proceeds to preferred stockholders, giving investors a false impression of the value of the dividend."

"While investors held or bought the company's common stock to receive the dividend, the complaint alleges, the company was cashing in by selling $137.5 million in an ATM offering at prices that the company, Brda and Palikaras knew were temporarily inflated by their manipulative scheme," the SEC said.

"A separate commission investigation regarding subsequent events related to Meta Materials ( MMAT ) remains ongoing," the agency said.

Brda said in a post X that "the SEC has chosen, IMO, to protect short sellers and naked short sellers as opposed to loyal shareholders of [Torchlight Energy and Meta Materials ( MMAT ).]

"We will defend these accusations with everything we have and now that the case is filed, the playing field will be leveled. This novel case, IMO, will open Pandora's box," Brda said.

Palikaras said in a separate post on X that he's "disappointed" in the SEC's decision to file the case against him.

"I strongly believe that the allegations are unfounded and intend to vigorously defend myself against them," Palikaras said. "Throughout my career, I have always acted with integrity and in the best interests of all stakeholders. I am confident that the truth will prevail, and I remain committed to my professional responsibilities and to the values that have guided me."

Meta Materials ( MMAT ) didn't immediately respond to a request for comment by MT Newswires.

Shares of Meta Materials ( MMAT ) were falling 3.1% in recent trading Tuesday.

Price: 2.83, Change: -0.09, Percent Change: -3.08