Investors concerned by Arca CEO investigation, aerospace leaders say no impact on growth

LAS CRUCES – Backers of ARCA Space Corporation are questioning the future of their financial investments in the Las Cruces aerospace company in the wake of CEO Dumitru Popescu’s arrest as part of an ongoing fraud investigation.

Michael Tumblin, a former Las Cruces resident who now resides in Tennessee, was among the investors who backed Popescu when ARCA offered stock for sale to New Mexico residents in November 2016. Tumblin invested in the company a second time when Popescu offered a two-for-one deal to existing investors, he said.

“Shock was my first reaction, and disappointment,” Tumblin said upon learning of Popescu’s arrest. “Just totally blown away because of the relationship I formed with Dumitru and not knowing exactly what is happening with ARCA right now. It’s been silent for the last 30 days, nothing on the website, nothing on Facebook, no response to emails or messaging through Facebook.”

Tumblin said he was “pleased and proud to be part of a company that moved to Las Cruces and seemed to be doing some really, really advanced things, especially on the space industry. To have a company in our back yard that was doing this stuff and having the spaceport not too far from where we are, it was exciting all the way around.”

More: CEO of Las Cruces aerospace company charged with fraud, embezzlement

Popescu, 40, was arrested Wednesday, Nov. 8, in Jonesboro, Georgia, and was extradited to Doña Ana County and booked into the Doña Ana County Detention Center on 12 counts of fraud, three counts of embezzlement and one count of misleading filings. It is unclear if the charges have any connection to ARCA, the aerospace engineering company that relocated to Las Cruces in 2014 from Romania.

According to Popescu’s attorney, Michael Stout, conditions of his release were set Thursday in response to an expedited motion for immediate release Stout filed earlier in the week. Stout said Popescu’s bond had been set at $40,000. Popescu remained in jail as of noon, Friday, although Stout said the money was being gathered to post bond.

Stout said Popescu maintains his innocence and will “zealously defend the charges.”

The complaints against Popescu allege he defrauded Michael Persico, CEO and founder of the Chicago-based telecommunications company Anova Technologies, in two separate incidents, between 2015 and 2016, in amounts exceeding $20,000. Popescu also is facing two counts of fraud over $2,500 and one count of fraud over $500, in additional to seven counts of securities fraud. He also is facing two counts of embezzlement over $2,500 and one count of embezzlement over $500.

The NM Securities Division and the Las Cruces Police Department are working together on the ongoing investigation. Representatives of the city and securities division have declined to comment. Investors with information pertinent to the investigation may call Las Cruces Police at 575-526-0795 or the Securities Division at 505-476-4580.

Industry impact

Meanwhile, ARCA staff were in the company’s office on Bataan Memorial East last week, continuing daily operations. Staff declined to comment in person, but provided the following prepared statement:

“ARCA Space Corporation will continue the development of its aerospace technology as scheduled. The company has full confidence in CEO Dumitru Popescu and expects him to lead the efforts. Mr. Popescu was charged in New Mexico state courts with alleged embezzlement and securities issues. However, Mr. Popescu maintains his innocence and expects to prevail in court proceedings. Meanwhile the work of the company will proceed with a goal of presenting a successful aerospike rocket engine. ARCA Space will keep the public updated on the progress of the company.”

In mid-October, ARCA won a $193,784 federal contract from the Defense Advanced Research Projects Agency for ARCABoard tests for military applications. That technology was built and tested in Las Cruces. Currently, ARCA is developing a single-stage-to-orbit rocket that would greatly reduce the cost of placing small satellites in orbit. It was to have been tested, in part, at Spaceport America.

It is not known what impact Popescu’s arrest will have on the planned testing and development of the technology. Local aerospace industry leaders and city officials say any problems at ARCA will not hamper the overall development of the budding space industry in southern New Mexico.

“The success of one company does not change our priorities and vision for our bright, promising future,” said Las Cruces City Manager Stuart Ed. “We remain committed to leveraging those science and technology resources that are uniquely ours — the spaceport, White Sands Missile Range, NASA and our Tier-1, four-year university, NMSU — to make science and technology a lucrative economic development opportunity moving forward.”

More: ARCA to perform first flight of aerospike engine at Spaceport America

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Dan Hicks, CEO of Spaceport America agreed.

SpaceX, United Launch Alliance and Virgin Galactic all had setbacks over the last few years, but that has not stopped the space industry from going strong, Hicks said.

“In fact, today it’s even grown exponentially since a couple years ago because everybody realizes humanity is going to be in space. So a company like ARCA that may have a financial difficulty or some type of issues isn’t going to cause anybody in the industry to say ‘oh I’m not going to get into space.’ In fact the converse of that is … there are companies out there to invest in. Some will make it and some won't.

“But that’s the case for the commercial space industry or any business sector,” Hicks added. “Some businesses make it and some don’t. So I don’t think any setback of a business is suddenly going to drive somebody in that sector to say ‘oh no, I can’t do this.’ So no, I don’t see any impact if ARCA were, unfortunately, to go away.”

Meanwhile, Tumblin holds out little hope for a happy ending to his investment.

“I’d like to say I’m hoping for the best, but I don’t have any hope,” he said. “I don’t see any way this turns out good for me, for us — Las Cruces, for the space industry or the employees at ARCA. Its’ really super-disappointing. It makes me very frustrated and angry that something this good and cool could have happened in Las Cruces and to be part of it was a dream come true. To have this ending? It’s hard.”

Jason Gibbs may be reached at 575-541-5451, jgibbs@lcsun-news.com or @fjgwriter on Twitter.