SEC Cracks Down on "Fake Biotech News"

Published: Apr 12, 2017

SEC Cracks Down on April 11, 2017
By Alex Keown, Breaking News Staff

WASHINGTON – The Securities and Exchange Commission singled out four biotech companies for allegedly promoting “fake news” in an attempt to manipulate share prices.

The SEC singled out ImmunoCellular Therapeutics , CytRx Corporation , Lion Biotechnologies and Galena Biopharma , for allegedly paying for “deceptive articles” that touted the company and its stock, but were in reality paid advertisements. Manish Singh, the former chief executive officer of ImmunoCellular and Michael Ahn, former CEO of Galena, were also charged by the SEC.

On Monday, the SEC took action against 27 individuals and entities, including four biotech companies, behind various alleged stock promotion schemes that the commission said left investors with the impression “they were reading independent, unbiased analyses on investing websites.” In reality, the SEC said website writers were being secretly compensated for touting company stocks. The writers of these articles allegedly posted “bullish” pieces about the companies that were really paid advertisements, as opposed to independent pieces of journalism, the SEC said. More than 250 articles specifically included false statements that the writers had not been compensated by the companies they were writing about, the SEC said in its announcement.

In its allegations against Singh and ImmunoCellular, the SEC said there were more than 50 Internet articles commissioned touting the company on investment sites between September 2011 and August 2012. Singh engaged Lidingo Holdings, a stock promotions firm, to pay writers thousands of dollars to promote ImmunoCellular on websites such as Seeking Alpha, the SEC said. The SEC said ImmunoCellular and Singh violated anti-fraud provisions in federal securities laws. Singh, who left ImmunoCellular in 2012, and ImmunoCellular have already settled the charges against them, the SEC said.

Lion Biotechnologies, which was also helmed by Singh, used Lidingo to publish bullish articles on sites like Seeking Alpha, the SEC alleged. Lidingo earned more than $230,000 over 2013 and part of 2014 for the work commissioned. Lidingo was also paid with 50,000 shares of company stock, the SEC said.

For CytRx, the SEC said the company was approached by a group known as DreamTeam Group to publish articles on investment sites like Seeking Alpha. DreamTeam would provide writers with ideas for articles about CytRx and pay them to publish those pieces. DreamTeam garnered $65,000 for its services over 2013 and 2014, the SEC said. According to the SEC, CytRx was looking for bullish articles about the company in late 2013 in time for a public offering of stock in January of 2014.

Galena and Ahn paid for more than 100 publications to promote the company stock, the SEC said in its allegations. Ahn engaged Lidingo Holdings and DreamTeam to also write and promote articles about Galena on websites such as Seeking Alpha, among others. The SEC said Galena paid Lidingo “at least $460,000 in monthly fees and a $20,000 bonus,” as well as provided stock options. DreamTeam was paid $50,000 for several months-worth of marketing and branding services, the SEC said. Not only did the company benefit by having stock prices jump, the SEC said Ahn sold 796,765 shares of Galena stuck during this period of artificial stock inflation in 2014. Galena has settled with the SEC.

“If a company pays someone to publish or publicize articles about its stock, it must be disclosed to the investing public. These companies, promoters, and writers allegedly misled investors by disguising paid promotions as objective and independent analyses,” Stephanie Avakian, acting director of the SEC’s Division of Enforcement,” said in a statement.

Back to news