SEC Charges Cancer Fighting – Now Restaurant Firms With Fraud
The Commission filed another in what has become a stream of offering fraud actions. This case sought to halt an offering – the last investor funds were deposited June 30, 2017 — in which investors were promised their funds would be placed in firms that were developing cancer fighting innovations – at least up until the time the promoter changed the purpose of the two firms from fighting cancer to operating a food service. SEC v. Muraca, Civil Action 1:17-cv-11400 (D. Mass. Filed July 31, 2017).
Named as defendants in the action are: Patrick Muraca, Nanomoleculardx, LLC and Metaborx, LLC. Mr. Murca is the CEO of both firms.
Mr. Murca began soliciting funds for his two firms – Nano and Meta – in April 2016 and has continued through the end of June 2017. The website for Nano claimed the firm is focused on the development of IVD and RUO diagnostic assays and kits for the early detection and monitoring of biomarkers in oncology and endocrinology. Metabo’s website claimed it was building novel therapies for cancer and metabolic disease. Mr. Murca described the firms as companions – Meta is the pharmaceutical company while Nano is developing the diagnostic test.
Throughout the period Mr. Muraca repeatedly represented to investors that the two firms would use investment funds for pharmaceutical development and commercialization. Investors received a stream of updates and solicitations centered on these claims and describing in detail the use to which their investment would be put. For example, in a September 2016 email to investors Mr. Muraca claimed that the “proceeds from this Seed offering will be used primarily for (1) Development and manufacturing of FAS and HER-2 for the commercialization of Manual kits, (ii) commencing the FDA review for the Nano based Product, and (iii) supporting ongoing regulatory and operational efforts necessary for commercialization. The completion of this Seed financing is critical for our pre-commercialization efforts.”
Two months later Mr. Muraca emailed various investors an update, soliciting additional funds. Those funds were to permit the firms to continue moving forward. The stream of communications continued through July 5, 2017 when Nano issued a press release announcing that the firm was closing one million dollars in “seed funding through private placements. “
None of the updates told investors that each firm changed its business. A filing made on March 31, 2017 with the Commonwealth of Massachusetts to register Nano as a foreign LLC, stated that the firm’s business purpose was “Serving food; Restaurant” — fighting cancer was apparently over. A few days later, on April 3, 2017, Meta filed to register as a foreign LLC with the Commonwealth of Massachusetts. Its filing described the firm’s business as “Serving food; Restaurant.”
Mr. Muraca and his firms raised about $1,175,000 from fifteen investors. Much of the investor money was misappropriated by Mr. Muraca. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is pending.