Reynolds claimed that his company’s product, called NeuroRelease, could essentially end paralysis.
One year after his arrest, Francis Reynolds, the chief executive officer of PixarBio, has been convicted of defrauding investors of $12.7 million.
According to the Boston Globe, it took two days of deliberations before a jury in the U.S. District Court of Boston convicted Reynolds of one count of securities fraud and three counts of obstruction of an agency proceeding. The latter charge stems from an investigation by the Securities and Exchange Commission, the Globe noted. The fraud charge, which is the most serious, carries a maximum sentence of 20 years in prison. Reynolds will be sentenced Feb. 6.
Reynolds, who was not only the CEO of PixarBio, but also listed as chief financial officer, chief scientific officer, chairman and co-founder of the company, was charged along with two associates, head of investor and public relations Kenneth Stromsland and a consulting associate, M. Jay Herod. Both of the associates pleaded guilty of the charges and testified in Reynold’s trial.
During the trial, the two men, along with other former PixarBio executives, testified that Reynolds made wild claims to investors about the company’s non-opioid treatment for pain and compared himself to Apple’s Steve Jobs and Jesus Christ. Reynolds claimed that his company’s product, called NeuroRelease, could essentially end paralysis. Reynolds would claim that he was a living testimony to the efficacy of NeuroRelease as he had cured himself of paralysis.
Although NeuroRelease had only been in preclinical stages, Reynolds told investors that the product was expected to be approved by the U.S Food and Drug Administration within a two-year frame, according to testimony against him. NeuroRelease, the government said in its complaint, was the anti-convulsant medication Tegretol (carbamazepine), which the company claimed would be reformulated as a non-opioid substitute for morphine.
In addition to guaranteeing a rapid approval process for NeuroRelease, the men wildly overinflated the value of PixarBio. One example found in the complaint against the man alleges that in a December 2015 email and memorandum to investors, Reynolds promised “a HUGE return on investment (ROI) for any investors in PixarBio’s NeuroRelease…. The value of our portfolio on Wall Street is soaring with excitement around our sales partnership. At only $1,000,000,000 right now, as we prepare to replace morphine in the clinic in late 2017 or early 2018, and we expect our valuation to long-term trend UP.”
Last year Stromsland pleaded guilty to one count of securities fraud, relating to his manipulative trading in the company’s stock, and one count of obstructing an agency proceeding, relating to his false testimony to the SEC during its 2017 investigation. According to the SEC, Stromsland’s false testimony included falsely denying that he had purchased shares of PixarBio to affect the company’s share price and falsely denying that he had been instructed to do so by Reynolds.
In February of this year, Herod pleaded guilty to the same charges, including lying to the SEC about Reynolds directing his participation in the fraud.
