More than a year after Altria (NYSE:MO) invested $12.8 billion in electronic cigarette maker Juul Labs in exchange for a 35% stake, the SEC has launched an investigation into the transaction, according to The Wall Street Journal.

Regulators want to know if Altria adequately disclosed the risks of its investment to investors. During the 14 months since the investment was made, Altria has written off over $8 billion worth of the deal's value.

The Federal Trade Commission is also investigating what role the tobacco company may have played in Juul's CEO being ousted last year and a former Altria executive getting installed in his place. 

Juul electronic cigarette and e-liquid pods

Image source: Juul Labs.

Up in smoke

Juul has been sharply criticized for the so-called "epidemic" of teen e-cig use. As the leading e-cig maker on the market, with an 80% share of the market at its peak, Juul has been identified as the most popular e-cig among teens, and health advocates argue it has not done enough to limit teen access to its devices.

The Food & Drug Administration has been critical of Altria's investment in Juul, and ex-commissioner Scott Gottlieb doubts the e-cig maker will be able to gain pre-marketing approval for its device. E-cig makers have until May 20 to submit to the FDA applications to have their devices approved for sale on the market. Altria has said it will assist Juul with its application. 

Philip Morris International (NYSE:PM) ended tentative merger negotiations with Altria because of the controversy surrounding its investment in Juul. Both tobacco companies will instead focus on marketing Philip Morris' IQOS heated tobacco device.