The Securities and Exchange Commission (SEC) has launched an inquiry into digital nonbank lender Better.com and its blank check company, Aurora Acquisition Corp., to evaluate allegations of federal securities laws violations, prompted by a former top executive’s recent lawsuit.
Better.com and Aurora received requests for documents from the SEC’s enforcement division in the second quarter of 2022. The requests were seeking information about Better’s “business and operations,” as well as “matters relating to certain actions and circumstances” of Better founder and CEO, Vishal Garg, “and his other business activities,” according to SEC filings.
“Better and Aurora are cooperating with the SEC,” according to a document Aurora filed with the SEC Thursday.
Better.com is a private company, but in May 2021 leaders announced plans to take it public with a $7.7 billion valuation via a merger with Aurora, sponsored by Novatar Capital. The transaction was expected to happen in Q4 2021.
In early June, Sarah Pierce, former executive vice president for customer experience, sales and operations at Better.com, filed a lawsuit claiming the company and Garg violated securities and labor laws as the lender began working toward its public offering.
In the lawsuit, Pierce alleges Garg — after firing 900 employees via Zoom in December, told the board of directors the company would report a profit by the end of Q1 2022 — which Pierce and other senior leaders explicitly said was impossible. Internal documents showed the company would not be profitable until Q3 2022, at the earliest.
Better.com reported a $221 million loss in the first quarter of 2022, compared to a $137.5 million profit during the same period in 2021.
Meanwhile, the company’s workforce was reduced from 5,800 in March of this year to 2,900 as of May 15 — including 1,500 U.S.-based workers, 1,200 in India and 200 in the United Kingdom.
Although company leaders still intend to take it public, Better.com is struggling to cope with the rising mortgage rate landscape, the decrease in refinancings and the need to invest in new products amid fierce competition.