SEC: Bothell biotech firm lied to inflate stock price
By LEVI PULKKINENSEATTLEPI.COM STAFF
Federal regulators filed complaints Tuesday against (CellCyte Genetics Corp.) a Bothell-based biotechnology company, saying management of the firm defrauded investors by inflating claims about a stem cell technology it was developing.
In a statement to media, a Securities and Exchange Commission spokesperson alleged that CellCyte Genetics Corp. misled investors into believing the technology was headed for human trials when in fact the company’s product remained in the early stages of development.
SEC officials allege stock promoters hired by CellCyte then spread the false information to investors, driving the stock price to $7.50-a-share before it plummeted back to less than a dime.
The complaints, filed in federal district court in Seattle, allege that in multiple public filings with the SEC and in other investor materials CellCyte falsely claimed it had received U.S. Food and Drug Administration approval to begin human clinical trials with a special stem cell compound to repair the heart, the spokesperson said.
The SEC alleges that CellCyte did not know how to properly formulate the stem cell compound, had never tried experiments with the compound to repair organs and had not satisfied any of the FDA requirements to begin human clinical trials.
In addition to the corporation, the SEC named in the suit CellCyte’s then-Chief Scientific Officer Ronald Berninger, of Mukilteo, who allegedly approved or participated in the drafting of false and misleading statements.
CellCyte and Berninger agreed to a settlement, without admitting or denying the SEC’s allegations, in which they each consented to a permanent injunction, according to the news statement. Berninger also agreed to pay a $50,000 penalty and be barred from serving as an officer or director of a public company for five years.
Speaking Tuesday, CellCyte attorney Steve Fogg noted that the company did not pay a financial penalty and emphasized that the decision to settle with the SEC carried no admittion of guilt. Fogg said the company is no longer pursuing the technology at issue in the complaint.
“Given that they’re moving forward with a separate technology, it just made sense to settle this lawsuit,” said Fogg, adding that “nobody cashed in on CellCyte stock who was an officer or director of CellCyte.”
In a separate action, the SEC has accused ex-CellCyte CEO Gary Reys, of Freeland, of approving the company’s fraudulent SEC filings. Federal regulators are seeking injunctive relief, a monetary penalty and an order barring Reys from serving as an officer or director of a public company.
A few other sources of this info:
SEC Whacks CellCyte Genetics & Bosses
Courthouse News Service – 29 minutes ago – SEATTLE (CN)
SEC: Bothell biotech co lied about breakthrough to inflate stock price
KOMO News – Martha Kang – 6 hours ago – SEATTLE
SEC accuses CellCyte Genetics, former top execs of fraud
TechFlash – Eric Engleman – 8 hours ago
SEC Charges CellCyte With Stem Cell Fraud
Xconomy – Luke Timmerman – 14 hours ago
SEC sues CellCyte, former execs for lying to investors
FierceBiotech – Calisha Myers – 14 hours ago
SEC accuses CellCyte, execs of fraud
Bizjournals.com – 14 hours ago
SEC Charges Seattle-Area Biotech Company With Fraudulently Hyping …
PharmaLive.com (press release) – 15 hours ago
BRIEF-US SEC charges CellCyte for fraudulently touting stem cell …
Forbes – Julie Vorman – 16 hours ago
SEC sues CellCyte and its executives
Seattle Times – 17 hours ago