Hyzon Motors agreed to pay a $25 million Securities and Exchange Commission fine to settle a fraud case over inflated claims about its fuel cell truck business.

Two former executives, including the founding CEO, also agreed to repay compensation received from the company. Two executives agreed to personally pay fines to the securities agency.

According to the SEC’s complaint, Hyzon:

• Misrepresented the status of its business dealings with potential customers and suppliers to suggest significant sales transactions were imminent. 
• Falsely stated that it had delivered its first fuel cell electric vehicle (FCEV) in July 2021.
• Posted a misleading video of the vehicle purportedly running on hydrogen when the vehicle was not so equipped.
• Falsely reported that it sold 87 FCEVs in 2021, when it had not sold any vehicles that year. 

“Transparency in the form of full, fair, and accurate disclosure is fundamental to the federal securities laws,” Jason Burt, regional director of the SEC’s Denver Regional Office, said in a news release. “The defendants allegedly violated this principle by misleading investors about virtually every aspect of Hyzon’s business.”

The government used similar language in filing criminal fraud charges against fuel cell startup Nikola Corp. founder Trevor Milton in July 2021. Milton was convicted on three charges in October 2022 and is awaiting sentencing in November. 

Nikola agreed to pay the SEC a $125 million fine. It is seeking reimbursement from Milton in recently concluded arbitration. 

Quagmire of challenges

Hyzon is a spinoff of Singapore’s Horizon Fuel Cell Technologies. It went public via special purpose acquisition company Decarbonization Plus Acquisition Corp. in July 2021. 

If the U.S. District Court for the Western District of New York approves the settlement, Hyzon will have cleared a quagmire of challenges. That includes a threatened delisting from the Nasdaq for late filing of financial reports. 

“Hyzon is pleased to put this chapter behind us, and continue our disciplined execution of operational milestones including commercial vehicle deployments and fuel cell technology developments,” Hyzon CEO Parker Meeks said in a news release.  

Meeks righting the ship but a sale is possible

Under Meeks, Hyzon has methodically moved the company toward production of a single 200-kilowatt heavy-duty fuel cell in plans to sell in the U.S., Europe and Australia. Most competitors, including Robert Bosch, the cellcentric joint venture of Daimler Truck and Volvo Group, and Toyota Motor Corp., combine smaller stacks for high power levels.

The distractions of recent years caused significant damage to the point where Hyzon’s finances, despite receiving $550 million in SPAC proceeds, are in rough shape. The company would consider a sale or merger. 

Hyzon had $158 million in cash at the end of July. It expects cash burn of about $12 million a month or $65 million to $73 million in the second half. It projects a full-year 2024 cash burn of $110 million to $120 million. That would more than exhaust its current resources.

“We continue to review all options available to us to raise additional capital including full merger and acquisitions,” Meeks said in a second-quarter earnings call with analysts on Aug. 8.

Settlement specifics 

Hyzon agreed to pay the SEC fine in three installments: $8.5 million within 30 days of entry of final judgment; $8.5 million by Dec.  31, 2024; and $8 million within 730 days of entry of final judgment. The company accrued a $22 million loss contingency in anticipation of the fine.

Former CEO Craig Knight and Max C.B. Holthausen, a former managing director of the company’s European subsidiary, Hyzon Motors Europe B.V., agreed to pay the SEC $100,000 and $200,000, respectively, for their roles.

Knight and former CFO Mark Gordon voluntarily returned $252,000 and $122,500, respectively, to Hyzon from incentive compensation they previously received.

Related articles:

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Refocused Hyzon Motors catches up on delinquent financial filings

Hydrogen fuel cell maker Hyzon eyes small-scale projects to advance

Click for more FreightWaves articles by Alan Adler.