© 2020 Arizent. All rights reserved.

How 81-year-old billionaire's ties to crypto bulls riled SEC

Register now

It’s the curious case of an 81-year-old biotech billionaire hooking up with Bitcoin bulls, and the partnership leading to all of them getting sued by the SEC.

Phillip Frost, who made a fortune from drug-development companies, teamed up with cryptocurrency investors Barry Honig and John O’Rourke to drive up penny stocks, the SEC said. One tactic was commissioning glowing articles on Seeking Alpha about companies the three owned shares in, while highlighting Frost’s involvement to show a wealthy and successful investor was a backer.

Now all three, along with seven others, are facing claims that they generated more than $27 million from unlawful stock sales in long-running pump-and-dump schemes that left investors with virtually worthless shares.

Honig of Boca Raton, Florida, led the group by buying large blocks of penny stocks at steep discounts from 2013 to 2018, according to the allegations in a lawsuit filed Friday, Sept. 7, in federal court in Manhattan. The group would then promote the companies to push stock prices higher, while secretly selling their shares at inflated values.

The agency said the group manipulated the stocks of companies including Miami-based Opko Health, which is led by Frost. Shares of the health-care company fell as much as 28% Friday before trading was halted.

Opko issued a statement late Friday saying the SEC’s lawsuit includes “serious factual inaccuracies,” and that the regulator filed it without giving the company advance notice.

“Opko and Dr. Frost would gladly have provided information that would have answered a number of the SEC’s apparent questions,” the company said in the statement. Opko and Frost “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.”

Frost is also chairman of the parent firm of Ladenburg Thalmann, a network of five independent broker-dealers with 4,300 advisors.

Honig’s lawyer didn’t respond to an email, and a call to Riot Blockchain, where O’Rourke is CEO, wasn’t returned.

O’Rourke is known in cryptocurrency circles because he runs Riot Blockchain, whose shares surged last year after it changed its name from Bioptix. The company also overhauled its business from making diagnostic machinery for biotech firms to investing in digital coins.

Honig owns as much as 10% of Riot Blockchain. The company’s shares plunged 24% Friday.

Frost is a former dermatology professor, who, over a four-decade career got rich investing in and running then-small drug-development companies. He eventually rose to be chairman of Teva Pharmaceutical Industries.

He and his wife, Patricia, have been among the most prolific and visible philanthropists in South Florida. The University of Miami’s prestigious Frost School of Music is named in their honor, as is the Phillip and Patricia Frost Museum of Science in a newly developed bayside complex.

Bloomberg News