US SEC charges Immunosyn with securities fraud
Three executives charged with insider trading and misleading investors about goat blood drug status
The US Securities and Exchange Commission has charged Immunosyn, a California-based biopharmaceutical company, with misleading investors about the regulatory status of the company’s sole product, a drug derived from goat blood.
The SEC also charged three executives with insider trading, and four executives and three shareholders with securities fraud.
The US securities regulator alleges that Immunosyn misleadingly stated in various public filings from 2006 to 2010 that its controlling shareholder, Argyll Biotechnologies, either planned to seek or had sought US regulatory approval process for human clinical trials for SF-1019, a drug derived from goat blood that was intended to treat a variety of ailments.
But the public filings failed to disclose that the US Food and Drug Administration (FDA) had already twice issued clinical holds on drug applications for SF-1019, prohibiting clinical trials from occurring, according to the SEC.
The SEC alleges that Immunosyn also misleadingly stated that it was seeking regulatory approval for human clinical trials of the drug in Europe, when in fact Argyll never submitted an application in Europe to conduct such trials.
According to the SEC’s complaint, Immunosyn’s chief scientific officer Douglas McClain Jr and Argyll’s chief scientific officer Douglas McClain Sr and Argyll’s chief executive James Miceli engaged in insider trading by raising about US$20m from their sale of Immunosyn shares while knowing that misrepresentations were being made about the regulatory status of SF-1019.
The SEC also charged Immunosyn’s chief executive Stephen Ferrone in the securities fraud scheme.
‘These executives routinely authorised public filings that told investors a story about the status of the company’s prized drug that was far different from the behind-the-scenes reality,’ said Merri Jo Gillette, regional director of the SEC’s Chicago Regional Office.
‘Three of these executives went one step further to illegally profit from their tall tales by selling their company stock and reaping more than $20m while repeatedly misleading investors about the drug.’
The SEC is seeking financial penalties and has ordered each defendant to disgorge all ill-gotten gains. All three men have also been debarred from serving as an officer or director of a public company.
