by T. GormanPosted on Posted in SECActions

One of the things government agencies do is protect the public health. Take for example, the FDA. One of its functions is to test new drugs to ensure that they are safe and effective. Accordingly, before new prescription drugs can be approved and sold to the public, the manufacturer must submit them to the agency for testing. If the FDA finds the drug is safe and effective it will authorize release. FDA approval can also aid the company in marketing the drug and, if the firm’s share are traded, the stock price. Failure to secure approval can have the opposite effect. The impact of agency approval is illustrated in the Commission’s most recent case involving FDA approval, SEC v. Carchedi, Civil Action No. 1:25-cv-10599 (D. Mass. Filed March 12, 2025).

Named as defendants in this action are: Stefano R. Carchedi, CEO, president and a member of the board of directors of Allarity Therapeutics, Inc., a small biopharmaceutical company based in Boston, from September 2019 to June 2022; Marie L. Foegh Ramwell, chief medical officer of Allarity; and James G. Cullen, CEO of the company from June 2022 to December 2023.

Over a two-year period, beginning in February 2020, Defendants Carchedi, Ramwell and Cullen concealed the impact of a new cancer drug of the firm, dovitinib. Specifically, beginning in February 2020 the firm did not submit a proposed drug application for the dovitinib because the data to support such an application was insufficient. While the FDA had reviewed the drug the agency recommended to the company that it not file a request for approval because the data was not sufficient.

Despite the FDA’s statements, the three executives circulated false statements that the drug would likely be approved. During the period the company raised money from investors. For example, on December 21, 2021, the firm issued a press release announcing the submission of its drug application. The firm failed to state that the FDA had advised against the submission. No new tests had been done.

The day of the press release Allarity announced it listed the firm’s stock for trading on NASDAQ. The same day the company also secured a $20 million investment from one investor. The investment was based in part on the assumption that a viable drug application for dovitinib had been made.

Subsequently, on February 18, 2022, the firm disclosed for the first time that the FDA had previously refused to even review the application, a drastic measure. The firm’s shares dropped 31% on the next trading day. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5. See Lit. Rel. No. 26265 (March 12, 2025).

Tagged with: , ,

by T. GormanPosted on Posted in SECActions

The Commission announced the resolution of two enforcement actions last week. Each centered on free riding. Be careful, be safe this week.

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the Commission filed no new civil injunctive actions and no new administrative proceedings. The agency did announce the resolution of two previously filed enforcement cases.

Free riding: SEC v. Acosta, Civil Action No. 3::25 – cv- 00323 (M.D. Penn.) is a previously filed action which named as defendant Rey Acosta. Mr. Acosta is a resident of Pennsylvania. In October 2023, he opened a brokerage account with Broker A. As of early January 2023, the account had a balance of $2.00. In early January he placed four ACH transfers totaling $1.5 million into his brokerage account from Bank A. The bank account, as he knew, did not have sufficient funds to cover the transactions. The transfers were reversed. Prior to that date, however, he purchased three stocks for a total of $122,311. Later the same day he sold all of the purchased stocks, obtaining profits of $93,565. Previously, Defendant had been warned by Broker B about free riding. The complaint alleges violations of Exchange Act Section 10(b) and Rule 10b-5. Defendant resolved the action, consenting to the entry of a permanent injunction based on the Section and Rule cited in the complaint. The injunction requires Defendant to pay a penalty of $15,000 and directs that prior to opening any brokerage account in the future he provide the firm with a copy of the complaint in this action. See Lit. Rel. No. 26261 (March 6, 2025).

Free riding: SEC v. Quartarano</em>, Civil Action No. 2:21-cv-02305 (E.D. N.Y.). The case is a previously filed action which named as a relief defendant Leonard Quartarano. Relief Defendant Quartararo consented to the entry of a final judgment that required him to pay disgorgement. He also had to pay prejudgment interest. Specifically, he was ordered to pay the Court $20,103.98 in disgorgement and prejudgment interest of $4,862.02. Relief Defendant Paul Casella was ordered to pay $33,128.88 which was deemed paid by an order in a parallel state case. Also in that case Lisa Eckert was directed to pay disgorgement of $46,600. See New York v. Quartararo, No. CR-0000238/2021 (Sup Ct. NY). The underlying case in each instance was based on situations in which investors had been defrauded of their money by those who had obtained it through wrongful conduct. Lit. Rel. 26260 (March 4, 2025). Please note: This entry corrects an earlier report on these cases concerning the related New York state case that was published last week.

ESMA

Markets:

The European Securities and Markets Authority issued one article of a planned series on market issues. The article is titled “Geopolitical and Macroeconomic Developments Driving Markert Uncertainty, dated February 2, 2025 (here).

Hong Kong

Report:

The Securities and Futures Commission of Hong Kong issued its latest quarterly report which wraps up 2024 for the agency. The report is dated March 6, 2025 (here).

Singapore

Deferred payments:

The Monetary Authority of Singapore announced the launch of an Electronic Deferred Payment Solutions initiative for Mid-2025 (here).

Tagged with: ,