A biotechnology billionaire faces charges from the Securities and Exchange Commission of being part of pump-and-dump schemes that netted $27 million and left retail investors holding the bag.
In a lawsuit filed Friday in the US District Court for the Southern District of New York, the SEC said three pump-and-dump schemes that took place between 2013 and 2018 involving three companies, referred to as Company A, Company B and Company C. OPKO Health chairman and CEO Phillip Frost is alleged to have taken part in the schemes involving Companies A and C, and OPKO Health itself is charged as well.
OPKO’s stock fell 19 percent on news of the lawsuit, from $5.66 to $4.58 per share. Frost – who served as chairman of Teva Pharmaceutical Industries from 2010 until 2015 – had a net worth of $2.5 billion as of Monday, according to Forbes.
OPKO said in a statement Friday that it was aware of the lawsuit, but that the SEC failed to notify the company of its intent to sue prior to filing the complaint, which the company said “contains serious factual inaccuracies.” “Had the SEC followed its own standard procedures, OPKO and Dr. Frost would gladly have provided information that would have answered a number of the SEC’s apparent questions, and filing of this lawsuit against them could have been avoided,” the statement read. It added that the complaint does not contain allegations about OPKO’s financial practices, statements or business practices.
The others named in the suit are Barry Honig, who allegedly led the schemes; John O’Rourke; John Stetson; Mark Groussman; Michael Brauser; John Ford; Elliot Maza; Brian Keller; and Robert Ladd. Maza, Keller and Kadd respectively served as CEO, chief scientific officer and CEO and Companies A, B and C, according to the complaint. Also charged are business entities associated with the 10 men, including OPKO.
The complaint alleges that Frost was involved in schemes to promote the stock of Companies A and C on the crowd-sourced investment content site Seeking Alpha, on which Ford would write articles promoting their shares and touting Frost’s involvement in the companies. Before the articles appeared on Seeking Alpha, several of the other participants would begin trading stock to create the impression of market activity and, after the stock prices were pumped up, sell it off, the SEC alleges.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
While the complaint does not identify the three companies by name, Company A may refer to BioZone Pharmaceuticals, of which Keller was a co-founder and served as chief scientific officer. The complaint also states that Maza served as CEO of Company A from June 2011 until January 2014, while his LinkedIn profile states he was BioZone’s CEO from July 2011 to January 2014 and does not list any other coinciding executive appointments.
Maza’s LinkedIn also describes him as having served as CEO of Immune Pharmaceuticals from January 2015 until August of this year. However, Immune said in a statement Monday that none of the allegations in the SEC’s complaint involved it or the market for its stock. Meanwhile, Ladd serves as president and CEO of MGT Capital Investments, which said in a statement Friday that had complied with the SEC’s subpoenas, further announcing Monday that Ladd would take a “leave of absence” to address the allegations.
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