- DoJ charged Melville ten Cate with tender offer fraud, securities fraud, and wire fraud in connection with several schemes on behalf of his company, Xcalibur Aerospace Ltd.
- Schemes include fraud tender offer worth over $14bn, arising from ten Cate's allegedly sham offer to purchase Textron, a large US-listed aircraft, defense, industrial company.
- SEC charged ten Cate with violating antifraud provisions as to the sham tender offer.
Tender Offer Fraud
- In November 2020, ten Cate and Xcalibur Aerospace, a now-defunct private company ten Cate controlled, placed advertisement in The New York Times re purchase of Textron.
- Announced proposed purchase of all existing stock of Textron for $60.50 a share.
- Purchase price represented a 56% premium over the stock’s previous closing price.
- The advertisement led to a spike in Textron trading and a subsequent trading halt.
- Announcement was false, misleading because ten Cate and Xcalibur lacked financial resources to complete the transaction, which would have required over $14 billion.
- Described Xcalibur’s corporate parent as a diversified global investment company, when it had no operations/assets and had been deactivated for failure to pay taxes.
- Failed to disclose that ten Cate, entities he controlled had been the subject of multiple bankruptcy, default judgments and Textron previously rejected Xcalibur’s overtures.
- Also, SEC investigation allegedly confirmed that defendant attempted to access SEC EDGAR system to complete process for public filing but was thwarted by SEC officials.
Other Fraud Schemes
- From August 2019 to November 2020, defendant executed fraudulent schemes designed to induce others to invest in, or otherwise transfer money to, Xcalibur and himself.
- Tried to secure $500mn in debt financing from US banks and third-party debt issuers.
- In doing so, ten Cate materially misrepresented Xcalibur’s business activities, finances.
- Falsely claimed that Xcalibur’s financial records had been audited by an international accounting firm, Xcalibur had outside investors, had cash reserves of almost £9.8 bn.
- DoJ charged defendant with tender offer fraud, securities fraud, two counts wire fraud.
- SEC charged ten Cate with violating antifraud provisions of the federal securities laws.
- Seeking permanent and conduct-based injunctions, penalty, officer and director bar.