Some readers will remember some odd moves in small biotechs like Galena Biosciences, Cytrx, and Lion Biotechnologies, among others. It can be hard to keep track, because there’s a lot of odd behavior down in those companies (here’s another recent example with Cyclacel). Here’s a welcome update to the earlier stories, courtesy of the SEC:
As part of its agreement, Lion will pay $100,000 in civil penalties resulting from a promotional scheme Singh, its former CEO, allegedly engaged in with Lidingo Holdings to generate 10 internet publications and 20 widely distributed emails promoting the drug company to potential investors from September 2013 to March 2014.
Singh, who signed a separate cease-and-desist order with the SEC, agreed to disgorge $1.75 million plus interest and pay $1 million in civil penalties. He also is barred from participating in penny stock offerings and prohibited from serving as an officer or director of a public company for five years.
The claims against Singh relate to his actions at Lion, as well as his service as CEO of Immunocellular and as the operator of Lavos LLC, which provided promotional services that included the publication of more than 400 articles describing securities on investment websites.
From August 2011 to March 2014, the SEC said Singh engaged in a paid stock-touting scheme involving 12 issuers, at least 10 writers, more than 400 internet publications, and the distribution of emails to thousands of potential investors. In addition to using his firm Lavos for much of the stock promotion activity, he allegedly worked with Lidingo to pay writers to publish articles about public company clients on investment websites and to coordinate the distribution of articles to thousands of electronic mailboxes.
The charges against the other people and companies are pretty similar: classic pump-and-dump stuff, whipping up enthusiasm among the clueless. Articles about small unknown biotech companies that pop up on investing web sites (or worse, in unsolicited emails) must be handled with gloves and tongs, with a thorough decontamination wash afterwards. It is (and always has been) a great field for people like this to work in, because once in a while there are miraculous stories where a small company hits it big on a longshot drug candidate. And in almost all these cases, miracle or failure, it’s likely that most of the potential investors don’t have enough technical knowledge to really make an informed decision, and thus can be vulnerable to hype.
Now, the overlap between people who buy into deals like this and people who read this blog is minimal. So the best I can hope for is that one of you get a chance to warn someone away at some point, and that will be a good deed to your name if you can.