“Riot Blockchain” Associate Settles Microcap Fraud Case with SEC

Dr. Philip Frost, a biotech billionaire accused of “fleecing investors…(in) lucrative market manipulation schemes” has agreed to pay $5.5 million in penalties to the American Securities and Exchange Commission (SEC), CNBC reports.

Frost is a business associate of Barry Honig, the accused ringleader int he alleged frauds. In late 2017, Hong made a very well-timed investment in biotech company Bioptix, just before the company changed its name to “Riot Blockchain”(NASDAQ: RIOT) and experienced a more than 5x boost in the price of its stock.

The SEC agreement with does not include an admission of guilt.

According to an SEC press release issued in September, Frost is one of 10 “prolific South Florida-based microcap fraudsters led by Barry Honig …charged…for their participation in long-running fraudulent schemes that generated over $27 million from unlawful stock sales…” -mainly in schemes to manipulate penny stocks.

Frost allegedly took part in two Honig-led schemes executed between 2013 and 2018:

“Honig allegedly orchestrated the acquisition of large quantities of the issuer’s stock at steep discounts, and after securing a substantial ownership interest in the companies, Honig and his associates engaged in illegal promotional activity and manipulative trading to artificially boost each issuer’s stock price and to give the stock the appearance of active trading volume.”

Another of the 10 individuals charged by the SEC in Honig-led schemes is John O’Rourke, the CEO of Bioptix, who presided over the company’s sudden rebranding as a “blockchain” company, a pivot that likely helped Honig exit his stock position profitably in January of this year.

“When stock goes up, you take a profit,” Honig told The Wall Street Journal. “Every good investor does it.”

Before the pivot, Honig allegedly became Riot’s largest shareholder after buying a 9% stake in Bioptix at a discount, when Bioptix stock was trading publicly for $9 USD.

Within weeks of the rebrand, the price of Riot Blockchain’s stock leaped briefly to almost $50 USD.

Today, Riot Blockchain stock trades for $1.51.

After pivoting, BioptiX/Riot purchased crypto mining equipment and a minority stake in the Canadian crypto exchange Coinsquare, a strategic investment the company said would help it license its own new crypto exchange venture.

Frost and his companies OPKO Health and Frost Gamma Investments Trust are among “the 10 people and 10 associated entities” charged by the SEC in September for involvement in the fraudulent penny stock schemes.

In addition to the $5.5 million paid by Frost, OPKO will pay $100 000 to the SEC.

Frost downplayed the settlement in a release regarding it from OPKO:

“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,” said Dr. Frost.

O’Rourke has now resigned as CEO and board member to Riot Blockchain, and his own case at the SEC is still awaiting settlement.

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