SEC v. Akazoo S.A., No. 1:20-cv-08101, Southern District of New York (May 21, 2020) — Complaint

* Not admitted in SDNY, pro hac vice application filed herewith.
MATTHEW J. GULDE*
[email protected]
SECURITIES AND EXCHANGE COMMISSION
801 Cherry Street, Suite 1900
Fort Worth, Texas 76102
 (817) 978-1410 (mjg)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SECURITIES AND EXCHANGE
COMMISSION,
   Plaintiff,
 vs.
AKAZOO S.A.,

 Defendant.

        20 Civ. ________ (_____)

    JURY TRIAL DEMANDED
ECF CASE

COMPLAINT
Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against
Akazoo S.A. (“Defendant,”  “Akazoo,” or “the Company”), alleges as follows:
I.
SUMMARY OF THE ACTION

1. Over a multi-year period spanning its existence as a private and then public entity,
Akazoo defrauded multiple groups of investors out of millions of dollars.  It claimed to be a
rapidly growing music streaming company focused on emerging markets with millions of paying
monthly subscribers and over €105 million (or $124 million) in annual revenue.  In reality, as it
recently admitted in a public filing with the SEC, the Nasdaq-listed company had no paying
users and negligible, if any, revenue.

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2.  Akazoo is the product of a 2019 business combination between (a) Akazoo
Limited (“Old Akazoo”), a purported subscription-based online music streaming company
formed in 2010 and (b) Modern Media Acquisition Corp. (“MMAC”), a special purpose
acquisition company.  When Akazoo took its current form, the Company held $54.8 million in
investor funds as a result of the business combination: $14.2 million from MMAC’s shareholders
and another $40.6 million from accredited investors (individuals and institutions) through a
private investment in public equity (“PIPE”) offering at the time of the combination.  The
Company obtained these investor funds by grossly misrepresenting the nature and success of its
music streaming business.
3. The Company continued to mislead the public while its shares were traded on the
Nasdaq from September 2019 to May 2020.  Among other things, Akazoo claimed €64.5 million
in revenue in the first half of 2019 and €15.6 million in gross profit based on thriving operations
in 25 countries.  In reality, Akazoo generated at most negligible revenue, operated in only a few
countries, and its only significant source of funds was the $54.8 million it had raised from
investors.
4. After a short-seller report exposed the Company’s fraud in April 2020, Akazoo’s
Board initiated an internal investigation of the Company’s operations.  On May 21, 2020,
Akazoo described the results of the internal investigation in a Form 6-K filed with the SEC,
admitting that “former members of Akazoo’s management team and associates defrauded
Akazoo’s investors...by materially misrepresenting Akazoo’s business, operations, and financial
results as part of a multi-year fraud.”  Additionally, Akazoo admitted that it had only negligible
revenue and subscribers, its historical financial statements were materially false and misleading,
and “former members of Akazoo management and associates participated in a sophisticated

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scheme to falsify Akazoo’s books and records[.]”  As a result of the conduct by Akazoo’s former
management team,  and as described in its public filings, Akazoo defrauded its investors and
violated the federal securities laws.
5. On May 1, 2020, the Nasdaq halted trading in Akazoo’s stock, whose price had
fallen from a high of $7.49 in the weeks following its formation in September 2019 to $1.16
when trading stopped.  On June 2, 2020, the Nasdaq delisted Akazoo’s stock.  As of the date of
this filing, Akazoo has depleted more than $23 million of investor funds and currently holds
approximately $31.5 million.
II.
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT

6. The SEC brings this action under Section 20(b) of the Securities Act of 1933
(“Securities Act”) [15 U.S.C. § 77t(b)] and Section 21(d) of the Securities Exchange Act of 1934
(“Exchange Act”) [15 U.S.C. § 78u(d)].  The SEC seeks permanent injunctions against the
Defendant, enjoining it from committing future violations of the securities-law provisions
identified in this Complaint, and disgorgement of all ill-gotten gains obtained as a result of its
fraudulent activity, plus prejudgment interest.  The SEC also seeks any other relief the Court
may deem appropriate pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)]
and Sections 20(b) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b) and 77v(a)].
III.
JURISDICTION AND VENUE

7. This Court has subject matter jurisdiction over this action under Section 22(a) of
the Securities Act [15 U.S.C. § 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act
[15 U.S.C. §§ 78u(d), 78u(e), and 78aa].  Defendant has directly or indirectly made use of the
means or instrumentalities of interstate commerce, or of the mails, or the facilities of a national

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securities exchange, in connection with the acts, practices, transactions, and courses of business
alleged in this Complaint.
8. Venue in this District is proper pursuant to Section 27 of the Exchange Act [15
U.S.C. § 78aa].  Certain of the transactions, acts, practices, and courses of business constituting
the violations alleged herein occurred within the Southern District of New York and elsewhere,
and were effected, directly or indirectly, by making use of the means or instruments or
instrumentalities of transportation or communication in interstate commerce, or of the mails, or
the facilities of a national securities exchange.  Both Akazoo’s and MMAC’s common stock
were traded on the Nasdaq, which is located in this District.  Prior to the business combination,
representatives of Old Akazoo and MMAC met in New York City to conduct due diligence
meetings and plan the PIPE offering.
IV.
DEFENDANTS

9. Akazoo S.A. is a company organized under the laws of Luxembourg with its
purported principal place of business in London, United Kingdom and its actual principal place
of business in Athens, Greece.  Akazoo’s ordinary shares are registered with the SEC pursuant to
Section 12(b) of the Exchange Act and were traded on the Nasdaq under the ticker “SONG,”
prior to being delisted on June 2, 2020.  Before its September 11, 2019 business combination
with MMAC, Akazoo operated as Akazoo Limited (“Old Akazoo”),  a company organized under
the laws of the United Kingdom with its primary place of business in Athens, Greece.  Old
Akazoo was a purported subscription-based online music streaming company.  It was formed in
2010 when it spun off from its Greek-based parent company.

5

V.
OTHER RELEVANT ENTITY

10. Modern Media Acquisition Corp. (“MMAC”) was a special purpose
acquisition corporation formed under the laws of Delaware for the purpose of effecting a merger,
share exchange, asset acquisition, or other similar business combination with a focus on media,
entertainment, and marketing service companies.  MMAC filed an initial public offering of
common stock with the SEC on Form S-1, effective May 11, 2017, and registered its common
stock under Section 12(b) of the Exchange Act.  On May 17, 2017, MMAC conducted an IPO
that raised $207 million, which the company was to hold in trust until it effected a business
combination.  MMAC’s common stock was publicly traded on the Nasdaq.  Based on the terms
set out in MMAC’s IPO prospectus, and in accordance with its charter, if MMAC did not
complete a deal by February 17, 2019, it had to dissolve, liquidate, or request an extension from
its shareholders.  MMAC’s shareholders had a right to redeem their shares for cash if MMAC
did not meet the February 17, 2019 deadline or they could keep their shares and vote for an
extension.  Under Exchange Act Rule 12g-3(a), Akazoo is a “successor issuer” to MMAC.
VI.
FACTS

A. Akazoo’s Formation
11. Beginning in May 2017, MMAC started searching for a media, entertainment, and
marketing service company with which to combine, eventually identifying Old Akazoo as a
target.  Old Akazoo purported to be a thriving business with key metrics comparable to the
streaming service Pandora.  Additionally, Old Akazoo claimed that it had: (1) launched a free,
ad-supported streaming radio service in 2017; and (2) acquired and developed a small portfolio
of patented artificial intelligence-based recommendation technology.

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12. Ultimately, MMAC and Old Akazoo combined on September 11, 2019 to form
Akazoo (Nasdaq: SONG).
B. Akazoo Fraudulently Raised $54.8 Million
i. MMAC Stock Rollover
13. Because MMAC did not meet its original deadline of February 2019 to
consummate a business combination, many of its shareholders chose to redeem their shares.
After paying out redeemed shares, and by the time MMAC completed the business combination
with Old Akazoo, only $14.2 million remained from the $207 million raised during MMAC’s
May 2017 IPO.
14. Leading into the business combination with Old Akazoo, MMAC’s shareholders
again had a choice: redeem their MMAC shares for cash or convert their shares into the right to
receive shares in Akazoo.  According to MMAC’s Certificate of Incorporation, approval of the
business combination required an affirmative vote of a majority of the outstanding MMAC
shares.  Encouraging its shareholders to support conversion, MMAC issued a proxy statement for
its August 28, 2019 shareholder meeting, based on information provided by Old Akazoo.  The
proxy statement contained the following claims, all of which Akazoo has since admitted were
false:
a. Old Akazoo had more than 38.2 million registered users and 4.6 million
paying subscribers as of December 31, 2018;
b. Old Akazoo also generated revenue through a free, ad-supported radio service
with 2.6 million users in its first full year of operation;
c. Old Akazoo operated in 25 different countries and growing;
d. Old Akazoo was a profitable business with positive EBITDA since inception;
e. Old Akazoo had €105 million in revenue in 2018; and

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f. Old Akazoo had developed strong relationships with a large number of global,
regional, and local music content providers.
15. Based on the proxy and investor presentations by the Old Akazoo’s CEO and
CFO (who became the CEO and CFO of Akazoo after the business combination with MMAC)
that included many of the same false claims, MMAC’s remaining shareholders approved the
business combination, and converted their MMAC shares into the right to receive Akazoo shares.
Per the terms of the business combination agreement, Akazoo received the remaining $14.2
million of MMAC investor funds.
ii. The PIPE Offering
16. The business combination agreement between MMAC and Old Akazoo required
there be at least $53 million in available cash for Akazoo upon consummation of the transaction.
Because MMAC had only $14.2 million in rolled-over investor funds, MMAC and Old Akazoo
amended their agreement to allow the shortfall to be raised through a PIPE offering of Akazoo
shares.
17. During the PIPE offering of Akazoo shares, from approximately July 2019 to
September 2019, Old Akazoo’s CEO and CFO participated in investor presentations where they
made the fraudulent claims about Akazoo’s subscribers and revenue listed above.
18. Induced by these fraudulent statements, investors purchased $40.6 million worth
of Akazoo shares and convertible warrants (the “PIPE Investors”).  Combined with the $14.2
million in investor funds from MMAC, Akazoo had $54.8 million to fund its operations.

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iii. Public Trading
19. From September 11, 2019 until May 21, 2020, Akazoo’s stock was traded on the
Nasdaq.  During that time, thousands of retail investors purchased shares of the Company’s
stock.
20. While its shares traded publicly on the Nasdaq, Akazoo made several false
statements in public reports signed by its CEO and filed with the SEC, including the following:
DATE MEDIUM

FALSE STATEMENT

September 11, 2019 Form 20-F; Press
Release
• Akazoo “operates in 25 countries.”

• “In the last 5 years, SONG’s
premium subscribers have grown
from 1.1 million in 2014 to over
5.3 million today.”

• In the first half of 2019, the
Company's revenues grew 39%
year-over-year.

September 27, 2019 Form 6-K
• Financial statements reflecting
€64.5 million in revenue in the
first half of 2019 and €15.6
million in gross profit.

November 25, 2019

Form 6-K; Press
Release attached
• “Akazoo S.A., SONG, currently
operates in 25 countries[.]”

• “In the past five years, SONG’s
premium subscribers have grown
from 1.1 million in 2014 to over
5.3 million[.]”

December 9, 2019 Form 6-K; Press
Release attached
Regarding 2019 Third Quarter results:

• “Revenues increased 24% to €35.0
compared to €28.1 million in the
third quarter of 2018.”

• “5.5 Million Premium Subscribers
end of Q3, Up 28% Year-over-
Year”

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21.   During the 8-month period that Akazoo disseminated its fraudulent statements to
the market, Akazoo’s stock traded at an average price of $4.96 and as high as $7.49 on
September 26, 2019.  By the time Nasdaq halted trading on May 1, 2020, after the fraud was
exposed, the stock price had plunged to $1.16.
22. As Akazoo would soon admit to the public, none of its repeated claims about its
subscriber base, operations, or revenues were true.  Akazoo’s streaming business generated, at
most, negligible revenue from September 2019 through May 2020.  The Company operated in
only a few countries, a  nd the Company had only a marginal amount of non-revenue generating
subscribers.  Rather, the Company’s only significant source of funds during that time was the
$54.8 million raised from investors.  Akazoo’s management knew, or was severely reckless in
not knowing, that the statements referenced in paragraphs 14, 17, and 20 about the Company’s
subscriber base, operations, and revenue were materially false and/or misleading.
23. Akazoo created the appearance of revenue by claiming that it had relationships
with companies it called “aggregators,”  who purportedly collected revenue from Akazoo’s
subscribers and paid expenses on Akazoo’s behalf.  In fact, the companies that Akazoo identified
as aggregators either did not exist or did not have a relationship with Akazoo.
C. Akazoo Publicly Admitted Its Fraud
24. On April 20, 2020, a short-selling hedge fund publicly released a detailed report
concluding that Akazoo was a complete scam, with negligible subscribers and revenue.

25. On April 22, 2020, Akazoo announced the formation of a special committee to
investigate the claims raised by the hedge fund and Akazoo’s share price closed at $1.6599—a
drop of more than 34% from the closing price on April 17, 2020, the last business day before the
short-selling hedge fund released its report.

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26. On May 1, 2020, Akazoo disclosed in a Form 6-K filing with the SEC that its
Board had terminated Akazoo’s CEO and asked him to resign from the Board based on his
failure to cooperate with the Special Committee’s investigation.
27. On May 21, 2020, Akazoo filed a Form 6-K with the SEC describing the results
of the Special Committee investigation, which confirmed that Akazoo was, in fact, a complete
sham.  In less than a month, the Special Committee determined that:
• “former members of Akazoo’s management team and associates defrauded Akazoo’s
investors . . . by materially misrepresenting Akazoo’s business, operations, and financial
results as part of a multi-year fraud”;

• Akazoo had only negligible actual revenue and subscribers for years, and its historical
financial statements were materially false and misleading; and

• “former members of Akazoo management and associates participated in a sophisticated
scheme to falsify Akazoo’s books and records.”

Additionally, the Company announced that Nasdaq was suspending trading in its shares and that
Akazoo would not dispute Nasdaq’s decision to delist its securities.
28. Although Akazoo claimed in the May 21, 2020 Form 6-K that it was “tak[ing] all
available steps to maximize recovery for defrauded investors,” Akazoo has spent over $6.5
million since the release of the short-selling hedge report.  Of the $54.8 million in investor funds
originally held by Akazoo (as discussed above in Paragraph 18), only $31.5 million currently
remains.
FIRST CLAIM FOR RELIEF
Violations of Section 17(a) of the Securities Act
[15 U.S.C. § 77q(a)]

29. Paragraphs 1 through 28 are re-alleged and incorporated by reference.

11

30. By engaging in the conduct described herein, Defendant Akazoo, directly or
indirectly, singly or in concert with others, in the offer or sale of securities, by use of the means
or instrumentalities of interstate commerce or of the mails:
a. knowingly or with severe recklessness employed a device, scheme, or artifice
to defraud; and/or
b. knowingly, recklessly, or negligently obtained money or property by means of
an untrue statement of a material fact or an omission to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading; and/or
c. knowingly, recklessly, or negligently engaged in a transaction, practice, or
course of business which operated or would operate as a fraud or deceit upon
the purchaser.
31. By engaging in this conduct, Defendant Akazoo violated, and unless enjoined will
continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
SECOND CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)]
and Rule 10b-5 Thereunder [17 C.F.R. § 240.10b-5]

32. Paragraphs 1 through 28 are re-alleged and incorporated by reference.
33. By engaging in the conduct described herein, Defendant Akazoo, directly or
indirectly, singly or in concert with others, by the use of the means or instrumentalities of
interstate commerce, or of the mails, or of the facilities of a national securities exchange, in
connection with the purchase or sale of securities, knowingly or recklessly:
a. employed devices, schemes, and artifices to defraud; and/or

12

b. made untrue statements of material facts or omitted to state material facts
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading; and
c. engaged in acts, practices, or courses of business which operated or would
operate as a fraud or deceit upon purchasers of securities and upon other
persons
34. By engaging in this conduct, Defendant Akazoo violated, and unless enjoined will
continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act
Rule 10b-5 [17 C.F.R. § 240.10b-5].
THIRD CLAIM FOR RELIEF
Violations of Section 13(a) of the Exchange Act
[15 U.S.C. § 78(m)] and Rules 12b-20, 13a-16, and 13a-19 thereunder
[17 C.F.R. §§ 240.12b-20, 240.13a-16, and 240.13a-19]

35. Paragraphs 1 through 28 are re-alleged and incorporated by reference.
36. Defendant Akazoo, in public filings with the SEC from September 2019 through
May 2020, misrepresented, failed to disclose, and/or made misleading omissions about the
Company’s operations, including its subscribers and revenue.
37. By engaging in this conduct, Defendant Akazoo failed to file Forms 6-K and 20-F
that were true and correct, and failed to include material information in its required statements
and reports as was necessary to make the statements made, in light of the circumstances under
which they were made, not misleading.
38. By engaging in this conduct, Defendant Akazoo violated, and unless enjoined,
will continue to violate, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-16, and 13a-
19 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-16, and 240.13a-19].

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FOURTH CLAIM FOR RELIEF
Violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act
[15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(2)(B)]

39. Paragraphs 1 through 28 are re-alleged and incorporated by reference.
40. By engaging in conduct described herein, from September 2019 through May
2020, Defendant Akazoo, whose securities are registered pursuant to Section 12 of the Exchange
Act [15 U.S.C. § 78l]:
• failed to make and keep books, records, and accounts, which, in reasonable detail,
accurately and fairly reflected the transactions and dispositions of its assets; and

• failed to devise and maintain a system of internal controls sufficient to provide
reasonable assurances that: (i) transactions were recorded as necessary to permit
preparation of financial statements in conformity with GAAP or any other criteria
applicable to such statements, and (ii) to maintain accountability of assets.

41. By engaging in this misconduct, Defendant Akazoo violated, and unless enjoined,
will continue to violate, Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§
78m(b)(2)(A) and 78m(b)(2)(B)].
PRAYER FOR RELIEF
I.
 Permanently restraining and enjoining Defendant from violating Section 17(a) of the
Securities Act [15 U.S.C. §§ 77q(a)]; and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of
the Exchange Act [15 U.S.C. §§ 78j(b); 78(m)(a); 78m(b)(2)(A) and 78m(b)(2)(B)] and Rules
10b-5, 12b-20, 13a-16, and 13a-19 thereunder [17 C.F.R. §§ 240.10b-5; 240.12b-20; 240.13a-16;
and 240.13a-19].
II.
 Ordering Defendant to disgorge all ill-gotten gains derived from the conduct alleged in
this Complaint, together with prejudgment interest thereon;

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III.
 Granting such other and further relief as this Court may deem just and proper.

Dated:  September 30, 2020   Respectfully submitted,

s/Matthew J. Gulde______________________
MATTHEW J. GULDE
*

[email protected]
SECURITIES AND EXCHANGE COMMISSION
801 Cherry Street, Suite 1900
Fort Worth, Texas 76102
(817) 978-1410 (mjg)

Counsel for Plaintiff
Securities and Exchange Commission

*Not admitted in SDNY, pro hac vice application filed herewith.

9/30/2020SDNY CM/ECF NextGen Version 1.2
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Complaints and Other Initiating Documents
1:20-cv-08101 Securities and Exchange Commission v. Akazoo S.A.
U.S. District Court
Southern District of New York
Notice of Electronic Filing
The following transaction was entered by Gulde, Matthew on 9/30/2020 at 4:23 PM EDT and filed on 9/30/2020
Case Name:Securities and Exchange Commission v. Akazoo S.A.
Case Number:1:20-cv-08101
Filer:Securities and Exchange Commission
Document Number:1
Docket Text:
COMPLAINT against Akazoo S.A.. Document filed by Securities and Exchange Commission..
(Gulde, Matthew)
1:20-cv-08101 Notice has been electronically mailed to:
Matthew Gulde     [email protected], [email protected], [email protected], [email protected], [email protected]
1:20-cv-08101 Notice has been delivered by other means to:
The following document(s) are associated with this transaction:
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0] [44287c33d1b597d5e99e3c8b8d9f9006badffb1c83cc01efbd796eaf838454ec98
21d19483c6582f213d90c80cadcfa8c2478236594f5d76701c3f9d4d1045c7]]

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* Not admitted in SDNY, pro hac vice application filed herewith. 

MATTHEW J. GULDE* 
[email protected] 
SECURITIES AND EXCHANGE COMMISSION 
801 Cherry Street, Suite 1900 
Fort Worth, Texas 76102 
 (817) 978-1410 (mjg) 
 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

SECURITIES AND EXCHANGE 
COMMISSION, 

   Plaintiff, 

 vs. 

AKAZOO S.A., 
 

 Defendant.  
 

 

 
        20 Civ. ________ (_____) 

 

    JURY TRIAL DEMANDED 

ECF CASE 

 

 

 

COMPLAINT 

Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against 

Akazoo S.A. (“Defendant,” “Akazoo,” or “the Company”), alleges as follows: 

I. 
SUMMARY OF THE ACTION 

 
1. Over a multi-year period spanning its existence as a private and then public entity, 

Akazoo defrauded multiple groups of investors out of millions of dollars.  It claimed to be a 

rapidly growing music streaming company focused on emerging markets with millions of paying 

monthly subscribers and over €105 million (or $124 million) in annual revenue.  In reality, as it 

recently admitted in a public filing with the SEC, the Nasdaq-listed company had no paying 

users and negligible, if any, revenue.   

Case 1:20-cv-08101   Document 1   Filed 09/30/20   Page 1 of 14



2 
 

2.  Akazoo is the product of a 2019 business combination between (a) Akazoo 

Limited (“Old Akazoo”), a purported subscription-based online music streaming company 

formed in 2010 and (b) Modern Media Acquisition Corp. (“MMAC”), a special purpose 

acquisition company.  When Akazoo took its current form, the Company held $54.8 million in 

investor funds as a result of the business combination: $14.2 million from MMAC’s shareholders 

and another $40.6 million from accredited investors (individuals and institutions) through a 

private investment in public equity (“PIPE”) offering at the time of the combination.  The 

Company obtained these investor funds by grossly misrepresenting the nature and success of its 

music streaming business. 

3. The Company continued to mislead the public while its shares were traded on the 

Nasdaq from September 2019 to May 2020.  Among other things, Akazoo claimed €64.5 million 

in revenue in the first half of 2019 and €15.6 million in gross profit based on thriving operations 

in 25 countries.  In reality, Akazoo generated at most negligible revenue, operated in only a few 

countries, and its only significant source of funds was the $54.8 million it had raised from 

investors. 

4. After a short-seller report exposed the Company’s fraud in April 2020, Akazoo’s 

Board initiated an internal investigation of the Company’s operations.  On May 21, 2020, 

Akazoo described the results of the internal investigation in a Form 6-K filed with the SEC, 

admitting that “former members of Akazoo’s management team and associates defrauded 

Akazoo’s investors…by materially misrepresenting Akazoo’s business, operations, and financial 

results as part of a multi-year fraud.”  Additionally, Akazoo admitted that it had only negligible 

revenue and subscribers, its historical financial statements were materially false and misleading, 

and “former members of Akazoo management and associates participated in a sophisticated 

Case 1:20-cv-08101   Document 1   Filed 09/30/20   Page 2 of 14



3 
 

scheme to falsify Akazoo’s books and records[.]”  As a result of the conduct by Akazoo’s former 

management team, and as described in its public filings, Akazoo defrauded its investors and 

violated the federal securities laws.  

5. On May 1, 2020, the Nasdaq halted trading in Akazoo’s stock, whose price had 

fallen from a high of $7.49 in the weeks following its formation in September 2019 to $1.16 

when trading stopped.  On June 2, 2020, the Nasdaq delisted Akazoo’s stock.  As of the date of 

this filing, Akazoo has depleted more than $23 million of investor funds and currently holds 

approximately $31.5 million. 

II. 
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

 
6. The SEC brings this action under Section 20(b) of the Securities Act of 1933 

(“Securities Act”) [15 U.S.C. § 77t(b)] and Section 21(d) of the Securities Exchange Act of 1934 

(“Exchange Act”) [15 U.S.C. § 78u(d)].  The SEC seeks permanent injunctions against the 

Defendant, enjoining it from committing future violations of the securities-law provisions 

identified in this Complaint, and disgorgement of all ill-gotten gains obtained as a result of its 

fraudulent activity, plus prejudgment interest.  The SEC also seeks any other relief the Court 

may deem appropriate pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)] 

and Sections 20(b) and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b) and 77v(a)]. 

III. 
JURISDICTION AND VENUE 

 
7. This Court has subject matter jurisdiction over this action under Section 22(a) of 

the Securities Act [15 U.S.C. § 77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act 

[15 U.S.C. §§ 78u(d), 78u(e), and 78aa].  Defendant has directly or indirectly made use of the 

means or instrumentalities of interstate commerce, or of the mails, or the facilities of a national 

Case 1:20-cv-08101   Document 1   Filed 09/30/20   Page 3 of 14



4 
 

securities exchange, in connection with the acts, practices, transactions, and courses of business 

alleged in this Complaint. 

8. Venue in this District is proper pursuant to Section 27 of the Exchange Act [15 

U.S.C. § 78aa].  Certain of the transactions, acts, practices, and courses of business constituting 

the violations alleged herein occurred within the Southern District of New York and elsewhere, 

and were effected, directly or indirectly, by making use of the means or instruments or 

instrumentalities of transportation or communication in interstate commerce, or of the mails, or 

the facilities of a national securities exchange.  Both Akazoo’s and MMAC’s common stock 

were traded on the Nasdaq, which is located in this District.  Prior to the business combination, 

representatives of Old Akazoo and MMAC met in New York City to conduct due diligence 

meetings and plan the PIPE offering. 

IV. 
DEFENDANTS 

 
9. Akazoo S.A. is a company organized under the laws of Luxembourg with its 

purported principal place of business in London, United Kingdom and its actual principal place 

of business in Athens, Greece.  Akazoo’s ordinary shares are registered with the SEC pursuant to 

Section 12(b) of the Exchange Act and were traded on the Nasdaq under the ticker “SONG,” 

prior to being delisted on June 2, 2020.  Before its September 11, 2019 business combination 

with MMAC, Akazoo operated as Akazoo Limited (“Old Akazoo”), a company organized under 

the laws of the United Kingdom with its primary place of business in Athens, Greece.  Old 

Akazoo was a purported subscription-based online music streaming company.  It was formed in 

2010 when it spun off from its Greek-based parent company.   

 

 

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V. 
OTHER RELEVANT ENTITY 

 
10. Modern Media Acquisition Corp. (“MMAC”) was a special purpose 

acquisition corporation formed under the laws of Delaware for the purpose of effecting a merger, 

share exchange, asset acquisition, or other similar business combination with a focus on media, 

entertainment, and marketing service companies.  MMAC filed an initial public offering of 

common stock with the SEC on Form S-1, effective May 11, 2017, and registered its common 

stock under Section 12(b) of the Exchange Act.  On May 17, 2017, MMAC conducted an IPO 

that raised $207 million, which the company was to hold in trust until it effected a business 

combination.  MMAC’s common stock was publicly traded on the Nasdaq.  Based on the terms 

set out in MMAC’s IPO prospectus, and in accordance with its charter, if MMAC did not 

complete a deal by February 17, 2019, it had to dissolve, liquidate, or request an extension from 

its shareholders.  MMAC’s shareholders had a right to redeem their shares for cash if MMAC 

did not meet the February 17, 2019 deadline or they could keep their shares and vote for an 

extension.  Under Exchange Act Rule 12g-3(a), Akazoo is a “successor issuer” to MMAC. 

VI. 
FACTS 

 
A. Akazoo’s Formation 

11. Beginning in May 2017, MMAC started searching for a media, entertainment, and 

marketing service company with which to combine, eventually identifying Old Akazoo as a 

target.  Old Akazoo purported to be a thriving business with key metrics comparable to the 

streaming service Pandora.  Additionally, Old Akazoo claimed that it had: (1) launched a free, 

ad-supported streaming radio service in 2017; and (2) acquired and developed a small portfolio 

of patented artificial intelligence-based recommendation technology.  

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12. Ultimately, MMAC and Old Akazoo combined on September 11, 2019 to form 

Akazoo (Nasdaq: SONG). 

B. Akazoo Fraudulently Raised $54.8 Million 

i. MMAC Stock Rollover 

13. Because MMAC did not meet its original deadline of February 2019 to 

consummate a business combination, many of its shareholders chose to redeem their shares.  

After paying out redeemed shares, and by the time MMAC completed the business combination 

with Old Akazoo, only $14.2 million remained from the $207 million raised during MMAC’s 

May 2017 IPO. 

14. Leading into the business combination with Old Akazoo, MMAC’s shareholders 

again had a choice: redeem their MMAC shares for cash or convert their shares into the right to 

receive shares in Akazoo.  According to MMAC’s Certificate of Incorporation, approval of the 

business combination required an affirmative vote of a majority of the outstanding MMAC 

shares.  Encouraging its shareholders to support conversion, MMAC issued a proxy statement for 

its August 28, 2019 shareholder meeting, based on information provided by Old Akazoo.  The 

proxy statement contained the following claims, all of which Akazoo has since admitted were 

false: 

a. Old Akazoo had more than 38.2 million registered users and 4.6 million 

paying subscribers as of December 31, 2018; 

b. Old Akazoo also generated revenue through a free, ad-supported radio service 

with 2.6 million users in its first full year of operation; 

c. Old Akazoo operated in 25 different countries and growing; 

d. Old Akazoo was a profitable business with positive EBITDA since inception; 

e. Old Akazoo had €105 million in revenue in 2018; and 

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f. Old Akazoo had developed strong relationships with a large number of global, 

regional, and local music content providers. 

15. Based on the proxy and investor presentations by the Old Akazoo’s CEO and 

CFO (who became the CEO and CFO of Akazoo after the business combination with MMAC) 

that included many of the same false claims, MMAC’s remaining shareholders approved the 

business combination, and converted their MMAC shares into the right to receive Akazoo shares.  

Per the terms of the business combination agreement, Akazoo received the remaining $14.2 

million of MMAC investor funds.  

ii. The PIPE Offering 

16. The business combination agreement between MMAC and Old Akazoo required 

there be at least $53 million in available cash for Akazoo upon consummation of the transaction.  

Because MMAC had only $14.2 million in rolled-over investor funds, MMAC and Old Akazoo 

amended their agreement to allow the shortfall to be raised through a PIPE offering of Akazoo 

shares. 

17. During the PIPE offering of Akazoo shares, from approximately July 2019 to 

September 2019, Old Akazoo’s CEO and CFO participated in investor presentations where they 

made the fraudulent claims about Akazoo’s subscribers and revenue listed above.  

18. Induced by these fraudulent statements, investors purchased $40.6 million worth 

of Akazoo shares and convertible warrants (the “PIPE Investors”).  Combined with the $14.2 

million in investor funds from MMAC, Akazoo had $54.8 million to fund its operations. 

 

 

 

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iii. Public Trading 

19. From September 11, 2019 until May 21, 2020, Akazoo’s stock was traded on the 

Nasdaq.  During that time, thousands of retail investors purchased shares of the Company’s 

stock. 

20. While its shares traded publicly on the Nasdaq, Akazoo made several false 

statements in public reports signed by its CEO and filed with the SEC, including the following: 

DATE MEDIUM 
 

FALSE STATEMENT 
 

September 11, 2019 Form 20-F; Press 
Release 

• Akazoo “operates in 25 countries.” 
 

• “In the last 5 years, SONG’s 
premium subscribers have grown 
from 1.1 million in 2014 to over 
5.3 million today.” 

 
• In the first half of 2019, the 

Company's revenues grew 39% 
year-over-year. 
 

September 27, 2019 Form 6-K 
• Financial statements reflecting 

€64.5 million in revenue in the 
first half of 2019 and €15.6 
million in gross profit.  
 

November 25, 2019 

 

Form 6-K; Press 
Release attached 

• “Akazoo S.A., SONG, currently 
operates in 25 countries[.]” 
 

• “In the past five years, SONG’s 
premium subscribers have grown 
from 1.1 million in 2014 to over 
5.3 million[.]” 
 

December 9, 2019 Form 6-K; Press 
Release attached 

Regarding 2019 Third Quarter results: 
 
• “Revenues increased 24% to €35.0 

compared to €28.1 million in the 
third quarter of 2018.” 
 

• “5.5 Million Premium Subscribers 
end of Q3, Up 28% Year-over-
Year” 

 

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21.   During the 8-month period that Akazoo disseminated its fraudulent statements to 

the market, Akazoo’s stock traded at an average price of $4.96 and as high as $7.49 on 

September 26, 2019.  By the time Nasdaq halted trading on May 1, 2020, after the fraud was 

exposed, the stock price had plunged to $1.16. 

22. As Akazoo would soon admit to the public, none of its repeated claims about its 

subscriber base, operations, or revenues were true.  Akazoo’s streaming business generated, at 

most, negligible revenue from September 2019 through May 2020.  The Company operated in 

only a few countries, and the Company had only a marginal amount of non-revenue generating 

subscribers.  Rather, the Company’s only significant source of funds during that time was the 

$54.8 million raised from investors.  Akazoo’s management knew, or was severely reckless in 

not knowing, that the statements referenced in paragraphs 14, 17, and 20 about the Company’s 

subscriber base, operations, and revenue were materially false and/or misleading.   

23. Akazoo created the appearance of revenue by claiming that it had relationships 

with companies it called “aggregators,” who purportedly collected revenue from Akazoo’s 

subscribers and paid expenses on Akazoo’s behalf.  In fact, the companies that Akazoo identified 

as aggregators either did not exist or did not have a relationship with Akazoo.  

C. Akazoo Publicly Admitted Its Fraud 

24. On April 20, 2020, a short-selling hedge fund publicly released a detailed report 

concluding that Akazoo was a complete scam, with negligible subscribers and revenue.  

25. On April 22, 2020, Akazoo announced the formation of a special committee to 

investigate the claims raised by the hedge fund and Akazoo’s share price closed at $1.6599—a 

drop of more than 34% from the closing price on April 17, 2020, the last business day before the 

short-selling hedge fund released its report. 

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26. On May 1, 2020, Akazoo disclosed in a Form 6-K filing with the SEC that its 

Board had terminated Akazoo’s CEO and asked him to resign from the Board based on his 

failure to cooperate with the Special Committee’s investigation.   

27. On May 21, 2020, Akazoo filed a Form 6-K with the SEC describing the results 

of the Special Committee investigation, which confirmed that Akazoo was, in fact, a complete 

sham.  In less than a month, the Special Committee determined that: 

• “former members of Akazoo’s management team and associates defrauded Akazoo’s 
investors . . . by materially misrepresenting Akazoo’s business, operations, and financial 
results as part of a multi-year fraud”; 
   

• Akazoo had only negligible actual revenue and subscribers for years, and its historical 
financial statements were materially false and misleading; and 
 

• “former members of Akazoo management and associates participated in a sophisticated 
scheme to falsify Akazoo’s books and records.” 
   

Additionally, the Company announced that Nasdaq was suspending trading in its shares and that 

Akazoo would not dispute Nasdaq’s decision to delist its securities. 

28. Although Akazoo claimed in the May 21, 2020 Form 6-K that it was “tak[ing] all 

available steps to maximize recovery for defrauded investors,” Akazoo has spent over $6.5 

million since the release of the short-selling hedge report.  Of the $54.8 million in investor funds 

originally held by Akazoo (as discussed above in Paragraph 18), only $31.5 million currently 

remains. 

FIRST CLAIM FOR RELIEF 

Violations of Section 17(a) of the Securities Act  
[15 U.S.C. § 77q(a)] 

  
29. Paragraphs 1 through 28 are re-alleged and incorporated by reference. 

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30. By engaging in the conduct described herein, Defendant Akazoo, directly or 

indirectly, singly or in concert with others, in the offer or sale of securities, by use of the means 

or instrumentalities of interstate commerce or of the mails: 

a. knowingly or with severe recklessness employed a device, scheme, or artifice 

to defraud; and/or 

b. knowingly, recklessly, or negligently obtained money or property by means of 

an untrue statement of a material fact or an omission to state a material fact 

necessary in order to make the statements made, in light of the circumstances 

under which they were made, not misleading; and/or 

c. knowingly, recklessly, or negligently engaged in a transaction, practice, or 

course of business which operated or would operate as a fraud or deceit upon 

the purchaser. 

31. By engaging in this conduct, Defendant Akazoo violated, and unless enjoined will 

continue to violate, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

SECOND CLAIM FOR RELIEF 

Violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] 
and Rule 10b-5 Thereunder [17 C.F.R. § 240.10b-5] 

 
32. Paragraphs 1 through 28 are re-alleged and incorporated by reference. 

33. By engaging in the conduct described herein, Defendant Akazoo, directly or 

indirectly, singly or in concert with others, by the use of the means or instrumentalities of 

interstate commerce, or of the mails, or of the facilities of a national securities exchange, in 

connection with the purchase or sale of securities, knowingly or recklessly:  

a. employed devices, schemes, and artifices to defraud; and/or 

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b. made untrue statements of material facts or omitted to state material facts 

necessary in order to make the statements made, in the light of the 

circumstances under which they were made, not misleading; and  

c. engaged in acts, practices, or courses of business which operated or would 

operate as a fraud or deceit upon purchasers of securities and upon other 

persons 

34. By engaging in this conduct, Defendant Akazoo violated, and unless enjoined will 

continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act 

Rule 10b-5 [17 C.F.R. § 240.10b-5]. 

THIRD CLAIM FOR RELIEF 

Violations of Section 13(a) of the Exchange Act  
[15 U.S.C. § 78(m)] and Rules 12b-20, 13a-16, and 13a-19 thereunder  

[17 C.F.R. §§ 240.12b-20, 240.13a-16, and 240.13a-19] 
 

35. Paragraphs 1 through 28 are re-alleged and incorporated by reference. 

36. Defendant Akazoo, in public filings with the SEC from September 2019 through 

May 2020, misrepresented, failed to disclose, and/or made misleading omissions about the 

Company’s operations, including its subscribers and revenue. 

37. By engaging in this conduct, Defendant Akazoo failed to file Forms 6-K and 20-F 

that were true and correct, and failed to include material information in its required statements 

and reports as was necessary to make the statements made, in light of the circumstances under 

which they were made, not misleading. 

38. By engaging in this conduct, Defendant Akazoo violated, and unless enjoined, 

will continue to violate, Section 13(a) of the Exchange Act and Rules 12b-20, 13a-16, and 13a-

19 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-16, and 240.13a-19]. 

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FOURTH CLAIM FOR RELIEF 

Violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act  
[15 U.S.C. §§ 78m(b)(2)(A) and 78m(b)(2)(B)] 

 
39. Paragraphs 1 through 28 are re-alleged and incorporated by reference. 

40. By engaging in conduct described herein, from September 2019 through May 

2020, Defendant Akazoo, whose securities are registered pursuant to Section 12 of the Exchange 

Act [15 U.S.C. § 78l]: 

• failed to make and keep books, records, and accounts, which, in reasonable detail, 
accurately and fairly reflected the transactions and dispositions of its assets; and 

 
• failed to devise and maintain a system of internal controls sufficient to provide 

reasonable assurances that: (i) transactions were recorded as necessary to permit 
preparation of financial statements in conformity with GAAP or any other criteria 
applicable to such statements, and (ii) to maintain accountability of assets. 

 
41. By engaging in this misconduct, Defendant Akazoo violated, and unless enjoined, 

will continue to violate, Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 

78m(b)(2)(A) and 78m(b)(2)(B)]. 

PRAYER FOR RELIEF 

I. 

 Permanently restraining and enjoining Defendant from violating Section 17(a) of the 

Securities Act [15 U.S.C. §§ 77q(a)]; and Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of 

the Exchange Act [15 U.S.C. §§ 78j(b); 78(m)(a); 78m(b)(2)(A) and 78m(b)(2)(B)] and Rules 

10b-5, 12b-20, 13a-16, and 13a-19 thereunder [17 C.F.R. §§ 240.10b-5; 240.12b-20; 240.13a-16; 

and 240.13a-19]. 

II. 

 Ordering Defendant to disgorge all ill-gotten gains derived from the conduct alleged in 

this Complaint, together with prejudgment interest thereon; 

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III. 

 Granting such other and further relief as this Court may deem just and proper. 

 
Dated:  September 30, 2020   Respectfully submitted,  

 
 
 
s/Matthew J. Gulde______________________ 
MATTHEW J. GULDE* 
[email protected] 
SECURITIES AND EXCHANGE COMMISSION 
801 Cherry Street, Suite 1900 
Fort Worth, Texas 76102 
(817) 978-1410 (mjg) 
 
Counsel for Plaintiff  
Securities and Exchange Commission 

 

 

*Not admitted in SDNY, pro hac vice application filed herewith. 

 

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9/30/2020 SDNY CM/ECF NextGen Version 1.2

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Complaints and Other Initiating Documents
1:20-cv-08101 Securities and Exchange Commission v. Akazoo S.A.

U.S. District Court

Southern District of New York

Notice of Electronic Filing 

The following transaction was entered by Gulde, Matthew on 9/30/2020 at 4:23 PM EDT and filed on 9/30/2020 
Case Name: Securities and Exchange Commission v. Akazoo S.A.
Case Number: 1:20-cv-08101
Filer: Securities and Exchange Commission
Document Number: 1

Docket Text: 
COMPLAINT against Akazoo S.A.. Document filed by Securities and Exchange Commission..
(Gulde, Matthew)

1:20-cv-08101 Notice has been electronically mailed to: 

Matthew Gulde     [email protected], [email protected], [email protected], [email protected], [email protected]

1:20-cv-08101 Notice has been delivered by other means to: 

The following document(s) are associated with this transaction:

Document description:Main Document 
Original filename:n/a
Electronic document Stamp:
[STAMP dcecfStamp_ID=1008691343 [Date=9/30/2020] [FileNumber=24685338-
0] [44287c33d1b597d5e99e3c8b8d9f9006badffb1c83cc01efbd796eaf838454ec98
21d19483c6582f213d90c80cadcfa8c2478236594f5d76701c3f9d4d1045c7]]

https://ecf.nysd.uscourts.gov/cgi-bin/iquery.pl?9347426935653-L_9999_1-0-545340
https://ecf.nysd.uscourts.gov/cgi-bin/DktRpt.pl?545340
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9/30/2020 SDNY CM/ECF NextGen Version 1.2

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	SUMMARY OF THE ACTION
	NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
	JURISDICTION AND VENUE
	A. Akazoo’s Formation
	B. Akazoo Fraudulently Raised $54.8 Million
	C. Akazoo Publicly Admitted Its Fraud