SEC Probing Better.com Over Alleged Securities Law Violations

Posted on by Judith E. Ashton

Topline

The Securities and Exchange Commission is examining mortgage lender Better.com and the special purpose acquisition company it has agreed to merge with, Aurora Acquisition Corp., to determine if they’ve violated federal securities laws, amid litigation against Better.com and its controversial CEO alleging fraud and other corporate governance problems.

Key Facts

Better and Aurora received “voluntary requests” for documents in the second quarter of this year, Aurora disclosed in an SEC filing Thursday.

Aurora said the companies are cooperating with the SEC, which asked for documents about Better’s business and operations, actions taken by CEO Vishal Garg and complaints against Garg and Better raised in a lawsuit by former head of sales and operations Sarah Pierce.

Pierce, who left Better in February, sued the company on June 7 alleging it misled investors in previous financial filings in its attempt to go public and retaliated against her for speaking out against Barg’s handling of a mass layoff in December 2021, among other complaints.

That winter, Garg fired 900 people—or 9% of the company’s workforce—over Zoom, one day after announcing a $750 million investment into Better and shortly before calling the departed workers “lazy” on social media.

Garg had multiple legal liabilities, conflicts of interest and corporate governance problems for years before the company placed him on a brief leave shortly after the layoffs, according to corporate disclosures filed by Better.

“We believe it’s a routine request for information, not an inquiry,” a Better spokesperson told Forbes of the SEC probe.

Contra

Better has asserted that Pierce’s claims were “without merit” and intends to “vigorously defend” the lawsuit.

Crucial Quote

“HELLO — WAKE UP BETTER TEAM,” Garg wrote in an email to employees obtained by Forbes in 2020. “You are TOO DAMN SLOW. You are a bunch of DUMB DOLPHINS and…DUMB DOLPHINS get caught in nets and eaten by sharks. SO STOP IT. STOP IT. STOP IT RIGHT NOW. YOU ARE EMBRASSING ME.”

Key Background

New York-based Better.com, founded in 2014, sought to speed up the mortgage approval process with an online application and screening process that can be completed in minutes. It took off during the boom lending market that coincided with the Covid-19 pandemic and was last valued at $7.7 billion when Better agreed to acquire Aurora in May 2021, according to a Pitchbook estimate. It has received extensive funding from Softbank and Goldman Sachs, the latter of which spent two years accusing entities controlled by Garg of “flagrant self-dealing” but has since dropped its legal claims. Better.com is an alum of Forbes‘ Fintech 50.

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Correction, July 15: A previous version of the story mischaracterized the SEC’s request for documents as an “investigation” for securities law violations. The story has been updated to remove that characterization and clarify that the violations are allegations.

Further Reading

Better.com Disclosures Show The Company Had Concerns About Its Controversial CEO Long Before Placing Him On Leave (Forbes)

Mortgages, Fraud Claims And ‘Dumb Dolphins’: A Tangled Past Haunts Better.com CEO Vishal Garg (Forbes)

SEC Probes Better.Com After Lawsuit Alleges Misled Investors (WSJ)

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