Miami Billionaire Charged By SEC For “Pump-And-Dump Schemes”

Miami billionaire Phillip Frost was one of ten individuals the Securities and Exchange Commission (SEC) charged on Friday, accused of participating in an extremely profitable “pump-and-dump schemes” for nearly five years in small capitalized publicly-traded biotech companies.

The SEC alleges that from 2013 to 2018, the Florida billionaire — who founded OPKO Health, a pharmaceutical and diagnostics firm, and nine other investors were involved in market manipulation of three companies’ stock prices.

Frost, Opko, and others were accused of profiting more than $27 million in the penny stock scheme by organizing stock buys and hiring investor relation teams — including penny stock promoters that would write misleading articles on popular financial websites — while failing to properly disclose their massive stakes.

The scheme left average investors “holding virtually worthless stock,” the SEC complaint read.

“[The group charged] engaged in brazen market manipulation that advanced their financial interests while fleecing innocent investors and undermining the integrity of our securities markets,” said Sanjay Wadhwa, senior associate director of the SEC’s Division of Enforcement. “They failed to appreciate, however, the SEC’s resolve to relentlessly pursue and punish participants in microcap fraud schemes.”

The SEC complaint in particular notes that Frost “enjoys a reputation as a successful biotech investor,” and was once touted the “Warren Buffet of biotech,” in a recent Forbes article.

According to the SEC, Barry Honig was the leader in organizing the pump in share prices of the three companies — identified by the Wall Street Journal as BioZone Pharmaceuticals, MGT Capital Investments and MabVax — paying various stock promoters that would then allocate funds for Seeking Alpha writers, massive email blasts, social media campaigns, and newsletters. It was a massive campaign to extract millions of dollars from broke Americans hoping that they could make it big in the stock market.

“Honig was the primary strategist, calling upon other Defendants to buy or sell stock, arrange for the issuance of shares, negotiate transactions, or engage in a promotional activity,” the SEC complaint said.

Florida investor Barry Honig, John Stetson, Michael Brauser, John R. O’Rourke III, Mark Groussman, Elliot Maza, Robert Ladd, Brian Keller, John H. Ford, Alpha Capital Anstalt, ATG Capital LLC, GRQ Consultants Inc., HS Contrarian Investments LLC, Grander Holdings Inc., Melechdavid Inc. and Stetson Capital Investments Inc. were also named in the SEC complaint.

In a statement published late Friday, Opko responded that Frost could have explained the situation if the SEC had followed the rules and notified him in advance of the charges that were being shaped against him. The charges, the company added, contain “serious factual inaccuracies.”

“Opko and Dr. Frost have always prided themselves on adhering to the highest standards of financial disclosure, and they are confident that once a proper investigation is completed and the facts of the case have been fully disclosed, the matter will be resolved favorably for them.”

And now we know why many Americans believe the stock market is rigged…

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According to Forbes, here are 20 Frost-owned companies, nearly all publically traded, but most are penny stocks: 

  • OPKO HEALTH (OPK) Frost owns 34% of therapeutics and diagnostics company with $1.2 billion in sales.
  • TEVA PHARMACEUTICALS INDUSTRIES (TEVA) A $20 billion (revenue) Israel-based big pharma, specializing in generics. Frost owns 1.5% of the stock.
  • VECTOR GROUP (VGR) Founded by fellow Philadelphian Bennett LeBow; owns tobacco company Liggett Group and commercial realtor Douglas Elliman Realty. Frost is largest shareholder, with 15%.
  • LADENBURG THALMANN (LTS) Regional investment bank and financial advisory; 4,000 advisors and $132 billion in assets. Frost owns 36.5% and Vector Group owns 8.23%.
  • CASTLE BRANDS (ROX) Maker of premium liquor, including Jefferson’s whiskey and Goslings rum. Frost owns 33.5% and Vector 8%.
  • COCONUT GROVE BANKSHARES (Private) Miami-Dade’s oldest bank; Frost owns 24%.
  • COGINT (COGT) Formerly Tiger Media; a cloud-based data and analytics company focused on marketing and risk management. Frost owns 29%.
  • BIOCARDIA (Private, Owned by Opko) Formed by Frost’s Sorbonne roommate, Dr. Simon Stertzer. A clinical-stage company using stem cells to repair cardiac muscle after a heart attack. Frost owns 32.7%.
  • DRONE AVIATION (DRNE) Florida-based maker of drones for law enforcement and military. Frost owns 14%.
  • ARNO THERAPEUTICS (ARNI) Developing antiprogestins for breast, endometrial and prostate cancers. Opko owns 9%.
  • ZEBRA BIOLOGICS (Private, Owned by Opko) Attempting to make generic versions of antibody drugs–like the bestselling rheumatoid arthritis drug Humira–that could be better than the original. Opko owns 29%.
  • OAO PHARMSYNTHEZ (Private, Owned by Opko)  Russian developer and marketer of new drugs in Eastern Europe. Opko owns a 17% equity interest.
  • RXI PHARMACEUTICALS (RXII)  Ladenburg took it public in December. Developing an RNA interface to prevent skin scars. Opko has an 19% equity interest.
  • COCRYSTAL PHARMA (COCP) New antivirals (hepatitis C, flu, Norovirus); Frost and Opko own 23%.
  • SEVION THERAPEUTICS (SVON)  Developing antibodies against difficult targets; treating cancer and immunological diseases. Frost and Opko own 20%.
  • NEOVASC (NVCN) Canadian maker of specialized cardiology devices. Frost owns 22%.
  • CHROMADEX (CDXC) Maker of ingredients for nutritional supplements. Frost owns 14.6%.
  • VBI VACCINES (VBIV) Developing a technology platform to design vaccines for hepatitis B, Zika and brain tumors. Opko has a 25% equity interest.
  • MABVAX THERAPEUTICS (MBVX) Clinical-stage cancer immunotherapy. Frost and Opko have an estimated 5% interest.
  • MUSCLEPHARM (MSLP) Nutritional supplements. Frost owns less than 5%.

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