The SEC has filed a lawsuit against Bothell, WA-based CellCyte Genetics and two former executives for lying to investors regarding its stem cell therapies. The developer has already been in hot water with German regulators and its shareholders after a public relations blitz in 2007 sent its stock price soaring from $4.00 to $7.50 and pushed its market value to $450 million.
The company allegedly hired a Canadian promoter to hype the company's pipeline. Between August and December 2007, millions of emails, brochures, spam faxes and newsletters were sent, touting an approval to begin human clinical trials of a stem cell compound designed to repair heart damage. But once investors got a whiff of what was happening, its share price plummeted to less than $0.10.
According to the SEC, the company was only granted a license for an early stage technology and therefore had no basis for the claims. At the time, CellCyte CEO Gary Reys defended the rise in the company's shares, asserting that the stock's performance demonstrated investor's confidence in the company's work. But according to regulators, "CellCyte did not know how to properly formulate the stem cell compound, had never attempted experiments with the compound to repair organs, and had not satisfied any of the FDA requirements to begin human clinical trials."
CellCyte, Reys and then-Chief Scientific Officer Ronald Berninger are charged with violating antifraud, reporting and registration laws. CellCyte and Berninger have settled with the SEC without admitting or denying guilt. Berninger will pay a $50,000 fine and is barred from serving as an officer or director for a public company for five years. The SEC has not yet settled with Reys, who is also charged with lying about his past employment and CellCyte's role in the scheme. The agency is also seeking an injunction against further violations, a monetary fine and an order preventing the former CEO from serving as an officer or director with a public company.
- here's the SEC release
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