Phillip Frost, one of the wealthiest billionaires and biggest philanthropists in South Florida, is among a group of 10 individuals and 10 associated entities charged in an SEC complaint about long-running fraudulent schemes.
The SEC says the schemes generated over $27 million from unlawful stock sales and caused significant harm to retail investors who were left holding virtually worthless stock.
According to the SEC’s complaint, from 2013 to 2018, a group of prolific South Florida-based microcap fraudsters led by Barry Honig manipulated the share price of the stock of three companies in classic pump-and-dump schemes. Miami biotech billionaire Frost allegedly participated in two of these three schemes. Honig allegedly orchestrated the acquisition of large quantities of the issuer’s stock at steep discounts, and after securing a substantial ownership interest in the companies, Honig and his associates engaged in illegal promotional activity and manipulative trading to artificially boost each issuer’s stock price and to give the stock the appearance of active trading volume. According to the SEC’s complaint, Honig and his associates then dumped their shares into the inflated market, reaping millions of dollars at the expense of unsuspecting investors.
“As alleged, Honig and his associates engaged in brazen market manipulation that advanced their financial interests while fleecing innocent investors and undermining the integrity of our securities markets,” said Sanjay Wadhwa, Senior Associate Director in the SEC’s Division of Enforcement. “They failed to appreciate, however, the SEC’s resolve to relentlessly pursue and punish participants in microcap fraud schemes.”
Forbes ranks Frost No. 924 522nd among the world’s billionaires with a current net worth of $2.6 billion. Frost was profiled in an SFBW cover story that told how he and a partner bought struggling Key Pharmaceuticals in 1972 and sold it to Schering-Plough for $835 million in 1986. He sold Ivax Corp. to Teva Pharmaceuticals in 2006 for $7.4 billion.
The SEC’s complaint, which was filed in federal district court in Manhattan, charges Honig, John Stetson, Michael Brauser, John R. O’Rourke III, Mark Groussman, Frost, Elliot Maza, Robert Ladd, Brian Keller, John H. Ford, Alpha Capital Anstalt, ATG Capital LLC, GRQ Consultants Inc., HS Contrarian Investments LLC, Grander Holdings Inc., Melechdavid Inc., OPKO Health Inc., Frost Gamma Investments Trust, Southern Biotech Inc., and Stetson Capital Investments Inc. with violating antifraud, beneficial ownership disclosure, and registration provisions of the federal securities laws and seeks monetary and equitable relief.
A Wall Street Journal article told how Honig, who lives in Boca Raton, was active in biotechnology but had pivoted to invest in cryptocurrency.
O’Rourke’s LinkedIn biography says he is chairman and CEO at Riot Blockhain. The Wall Street Journal article on Honig talked about how Honig had paired back his investment in the company after its stock price increased rapidly.
A biography for Brauser says he is a Boca Raton resident, who once led Kertz Security, which was later acquired by H. Wayne Huizenga. He serves as chairman of Cogint Inc. (NASDAQ: COGT), which is a marketing services firm.
A LinkedIn biography for Mark Groussman says he is an investor in private and public companies and lives in the Miami/Fort Lauderdale area.
A statement provided by the Sard Verbinnen and Co. law firm on behalf of OPKO Health said, “OPKO learned today that the Securities and Exchange Commission has filed a lawsuit in the Southern District of New York against a number of individuals and entities, including OPKO and its CEO and Chairman Phillip Frost. The SEC failed to provide notice of its intent to sue prior to filing the complaint, which contains serious factual inaccuracies. Had the SEC followed its own standard procedures, OPKO and Dr. Frost would gladly have provided information that would have answered a number of the SEC’s apparent questions, and filing of this lawsuit against them could have been avoided. OPKO and Dr. Frost have always prided themselves on adhering to the highest standards of financial disclosure, and they are confident that once a proper investigation is completed and the facts of the case have been fully disclosed, the matter will be resolved favorably for them.”
The SEC’s continuing investigation is being conducted out of its New York Regional Office by Katherine Bromberg and Charu Chandrasekhar of the Enforcement Division’s Retail Strategy Task Force, Tim Nealon, Ricky Tong, Joseph Darragh, and Michael Paley of the Enforcement Division’s Microcap Fraud Task Force, and Jon Daniels of the Enforcement Division’s Cyber Unit, with the assistance of Edward Janowsky and Steven Vitulano of the New York Regional Office Broker-Dealer and Exchange Examination Program. The litigation will be led by Nancy Brown, Ms. Bromberg, and Mr. Daniels, and the case is being supervised by Mr. Wadhwa. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.