The SEC’s case against Phillip Frost involves the biotech-turned-blockchain company Riot Blockchain.
Frost, who is in his 80s, was one of 10 individuals and 10 associated firms charged by the US regulatory agency in September with participating in blockchain-related pump-and-dump schemes.
Without admitting or denying the SEC’s allegations, and pending a court approval, Frost agreed to pay a $5.5 million penalty and a partial ban on trading in penny stocks. Pharma group OPKO Health, where Frost acts as CEO and Chairman, will pay an additional $100,000 penalty.
“We have reached agreement with the SEC that will end a potentially expensive, contentious and time-consuming litigation and I am happy that we can focus on an exciting and productive 2019 for OPKO Health,” Frost said in a statement.
The SEC’s case against the healthcare billionaire and his conspirators involves the biotech-turned-blockchain company Riot Blockchain, which until October 2017 was a penny stock known as Bioptix. Following its rebranding, Riot’s stock surged more than 600 percent during that period, with the bulk of those gains coming after the company switched its focus to cryptocurrencies.
Although its rebranding might seem like a minor thing, the change caused the company’s share price to jump from under $5 to near $50 in a matter of days. The company’s blockchain involvement has also drawn scrutiny from the Securities and Exchange Commission.
Bleak Business Highlights
Riot reported $2.8 million of revenue and a net loss of $24.4 million for the second quarter. In the January-March quarter, the former biotech company, which entered the cryptocurrency business in October 2017, brought in less than $1 million in revenue, according to its filing in May.
The company had $1.6 million in cash as of September 30, down from $1.7 million at the end of the second quarter, and from $41.7 million in December, according to the two most recent quarterly filings.
This is not the first time a blockchain-related company got in trouble due to a foray into the cryptocurrency-inspired technology.
Last year, the US securities watchdog also suspended another company tied distantly to the cryptocurrency industry after temporarily halting trading in shares of CIAO Group, citing concerns over the Nevada technology company’s planned initial coin offering (ICO).