The Securities and Exchange Commission said today that 81 year old Phillip Frost, the Pharmaceutical billionaire, who parlayed stakes in small pharmaceutical companies into a $2.8 billion fortune, has been accused of participating with “a group of prolific South Florida-based microcap fraudsters” in an attempt to promote two penny stocks.
The SEC has chargeded 9 more individuals apart from Frost for manipulating the stocks of three companies by trading shares to create the illusion of liquidity and then using paid-for posts on the website Seeking Alpha and other Internet message boards. The SEC said that the effort had resulted in profits of close to $27 million, when retail investors were left holding worthless shares.
Investigators had pointed to an investor named Barry C. Honig who served as the ringleader of the scheme. In all the three cases, the SEC says, Honig had orchestrated the purchase of shares at very high discounts. The participants used to buy shares in coordination with each other which used to drive prices up. The group were able to smartly control the actions of management without even disclosing that they were in control. Then they would arrange for the publication of promotional articles to spice up the stock price further.
Sanjay Wadhwa, Senior Associate Director in the SEC’s Division of Enforcement said that Honig and his associates engaged in brazen market manipulation that advanced their financial interests while fleecing investors and undermining the integrity of the securities markets. He added that the SEC’s resolve to relentlessly pursue and punish participants in microcap fraud schemes was strong enough to get hold of them.
Frost is currently the chief executive and chairman of OPKO Health which is a $2.7 billion big maker of growth hormone, vitamin-D-based drugs and clotting factor for hemophiliacs. After the SEC announced that it was pressing charges, shares in the company dropped by 18%.
Frost’s representatives for OPKO Health and personal office did not return requests for comment.