U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23201 / February 19, 2015
Securities and Exchange Commission v. Michael M. Cohen and Proteonomix, Inc., Civil Action No. 2:15-cv-01292-MCA-JBC
SEC Charges New Jersey Biotechnology Company and Its Chief Executive Officer with Securities Fraud
The Securities and Exchange Commission has charged Proteonomix, Inc., a New Jersey biotechnology company, and Michael M. Cohen, the company's Chief Executive Officer, with securities fraud and other violations.
Proteonomix and Cohen have agreed to settle the SEC's charges and pay monetary amounts to be determined by the Court. Cohen also has agreed to be barred from serving as an officer or director of a publicly-traded company and from participating in any penny stock offering.
According to the SEC's complaint filed in the U.S. District Court for the District of New Jersey, from approximately 2008 through 2012, Proteonomix and Cohen - who was the company's Chief Executive Officer, Chairman of its Board of Directors, and at times its Chief Financial Officer - committed multiple violations of the securities laws that enabled Cohen to pocket more than $600,000 for his own or his family's benefit. The SEC alleges that Proteonomix and Cohen fraudulently issued and transferred millions of Proteonomix shares to corporate entities that were named after Cohen's wife and children and nominally controlled by Cohen's father-in-law. In fact, however, Cohen secretly controlled brokerage and bank accounts in the names of these entities. Cohen directed the issuance and transfer of Proteonomix shares to these entities, directed the subsequent sale of these shares into the open market, and directed that proceeds from these share sales be transferred to Cohen or spent for his direct benefit. The SEC alleges that Proteonomix and Cohen falsely recorded these share issuances and transfers on the company's accounting books and records and failed to disclose in the company's SEC filings that the transactions with his father-in-law's entities were related party transactions. The SEC also alleges that Cohen improperly directed his father-in-law's entities to transfer shares of Proteonomix stock in unregistered transactions to pay the company's debts, and that Cohen falsely certified the accuracy of Proteonomix's reports and financial statements that were filed with the SEC.
In a parallel case, the U.S. Attorney's Office for the District of New Jersey today announced that Cohen has pleaded guilty to a criminal information.
The SEC alleges that the defendants violated, among other provisions, the registration, antifraud, reporting, books and records, and internal controls provisions of the securities laws. Specifically, the SEC's complaint charges Proteonomix with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 (the "Securities Act"); Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 (the "Exchange Act"); and Rules 10b-5, 12b-20, 13a-1, and 13a-13 thereunder. The complaint charges Cohen with violating Sections 5(a), 5(c), and 17(a) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act; Rules 10b-5, 13a-14, and 13b2-1 thereunder; and with aiding and abetting violations of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and Rules 12b-20, 13a-1, and 13a-13.
In addition to the monetary relief and bars described above, Cohen has consented to the entry of a judgment permanently enjoining him from violating Sections 5(a), 5(c), and 17(a) of the Securities Act; Sections 10(b) and 13(b)(5) of the Exchange Act; Rules 10b-5, 13a-14, and 13b2-1; and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, and 13a-13.
Proteonomix has consented, without admitting or denying the SEC's allegations, to the entry of a judgment permanently enjoining the company from violating Sections 5(a), 5(c), and 17(a) of the Securities Act; Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of the Exchange Act; and Rules 10b-5, 12b-20, 13a-1, and 13a-13. The settlements are subject to approval by the Court.
The SEC's investigation was conducted by Timothy K. Halloran, Heidi H. Mayor, and Michi Harthcock, and supervised by M. Alexander Koch. The SEC appreciates the assistance of the U.S. Attorney's Office for the District of New Jersey and the Federal Bureau of Investigation in this matter.