SEC Inquiry Targets Boxabl, A Modular Home Builder

A modular construction company that has received business from Elon Musk appears to be under investigation by the Securities and Exchange Commission.

Boxabl acknowledged in an updated financial statement that it was the subject of an SEC inquiry, Insider reported. Little is publicly known about the inquiry, but the regulator has subpoenaed at least two people.

In its filing, Boxabl suggested the inquiry was attached to pending lawsuits and “unconventional marketing of securities offerings.”

Those approached by the SEC, including former employees and an individual with knowledge of Boxabl’s financial reporting, were asked about business practices, the conduct of company executives and public crowdfunding rounds that raised tens of millions for the Nevada-based firm.

Boxabl manufactures prefabricated tiny houses, designed to be a cheap alternative to traditionally constructed homes. Co-founded by son-and-father duo Galiano and Paolo Tiramani, the startup has leaned heavily on public support, raising more than $150 million in the last three years.

Despite its nascent status, Boxabl has run into some significant issues. Former chief operating officer Greg Ehlers filed a whistleblower complaint with the SEC, after which he was improperly terminated, according to a lawsuit filed in Nevada. Ehlers alleged the company wasn’t being truthful about manufacturing costs or its business model to investors.

That case is scheduled to go to trial in a year.

Mutual fund manager Leader Capital recently sued Boxabl, accusing the company of delaying the sale of shares it holds in the construction company. Leader planned to sell the stock for below the share price Boxabl recently charged investors, according to the lawsuit, which would have netted the fund manager $3.7 million if the deal hadn’t collapsed.

Boxabl didn’t disclose its 2022 full-year performance until last month, when it reported $33 million in operating losses, doubling the total from the previous year.

The two co-founders raised their base salaries by nearly $200,000 for this year. They each sold approximately $5 million in company stock last year, though they remain majority shareholders.

The company doesn’t have regulatory approval to sell its Casitas in any state.

— Holden Walter-Warner