According to executives at Immunosyn and its controlling shareholder Argyll Biotechnologies, the biotech was onto something truly special. Its lead drug, SF-1019, which had been derived from goat's blood, had either begun the regulatory process for clinical trials in the U.S. or was about to begin. The same held true for Europe. And SF-1019 showed promise for a variety of ailments, including HIV.
The problem, says the SEC, is that they neglected to tell the people they were selling shares but that the FDA had twice put a clinical hold on their trials for SF-1019. And that regulatory process in Europe? That had never even begun. But Immunosyn's CFO Douglas McClain Jr., Argyll's Chief Scientific Officer Douglas McClain Sr., and Argyll's CEO James Miceli raised $20 million from investors, the SEC alleges, including a group of terminally ill patients at a holistic clinic. The SEC alleges that McClain Sr. raised approximately $300,000 from the holistic health patients, but never gave them the shares they bought.
"These executives routinely authorized public filings that told investors a story about the status of the company's prized drug that was far different from the behind-the-scenes reality," said Merri Jo Gillette, Regional Director of the SEC's Chicago regional office. "Three of these executives went one step further to illegally profit from their tall tales by selling their company stock and reaping more than $20 million while repeatedly misleading investors about the drug."
There's nothing new about biotech scams. But the SEC's allegations help highlight how important it is to verify some of the claims made by small biotechs flying under the radar.
- here's the release from the SEC