According to the SEC, vaccine company CytoGenix was foundering financially when two men hatched a plan to convince investors otherwise. And now, the pair is facing charges.
The commission last week charged Christopher Plummer, a "serial con artist," and CytoGenix CEO Lex Cowsert with defrauding investors with "extravagant claims" about the microcap's revenue and other benefits stemming from a revenue agreement with Plummer's company, Franklin Power & Light. Plummer's "entity was a complete sham," while CytoGenix had at the time already lost all of its vaccine patents and other intellectual property in a lawsuit, the SEC alleges.
As the SEC's complaint notes, CytoGenix "was in dire financial straits" when Plummer came along, and after an agreement between the two, the struggling company began issuing false press releases that "had a significant market impact."
The releases "not only failed to disclose the loss of those critical assets, but … instead touted outdated test results and a non-existent new laboratory for testing the vaccine products that it claimed to be developing and made other materially false and misleading statements," the complaint reads.
Also among those releases were announcements concerning a joint venture with Plummer's company, which in August 2010 took CytoGenix' stock price from 2 cents to 16 cents in a one-month period.
And the fraud didn't end there, the SEC says. According to its complaint, Cowsert and Plummer made off with the proceeds from purported private offerings; Cowsert got ahold of about $91,000 in funds directly from CytoGenix investors by telling them they were investing in a private placement of CytoGenix stock, asking shareholders to make checks payable to him personally. Plummer, meanwhile, allegedly defrauded a shareholder out of more than 6.5 million free trading shares.
As The Wall Street Journal notes, the charges are just the latest in a stepped-up crackdown on suspected fraud involving the market's smallest companies. As the agency moves away from post-financial crisis cases, it's focusing its attention on microcaps and continuing to lobby Congress for more funding.
- read the litigation release
- see the complaint (PDF)
- get The Wall Street Journal's take (sub. req.)