Miami can't build anything nice without someone getting charged with fraud along the way. Miami Beach pharmaceutical baron Phillip Frost pumped enough money into the new downtown science museum that the city wound up naming the place after him. He lives in a $59 million mansion on Star Island and sits in the Florida Inventors Hall of Fame.
But he might also be a stock fraudster. The U.S. Securities and Exchange Commission today unsealed a massive lawsuit against Frost and many of his business partners. In it, the SEC alleges Frost and nine business partners used what are known as "pump-and-dump" schemes to inflate the value of essentially worthless stocks before selling the shares to unsuspecting victims. The SEC alleges the group made roughly $27 million by pumping and dumping various stocks, including those of Frost's pharmaceutical company, OPKO.
The SEC says the stock-manipulation ring was led by another Florida investor, Barry Honig. The feds say Honig partnered with a rotating cast of wealthy elites to artificially pump up the value of various stocks while leaving unsuspecting investors "holding virtually worthless shares."
The SEC listed three schemes related to three unnamed companies — the feds say Frost participated in two of them. The SEC says Frost personally violated five securities laws. Five other defendants also live in South Florida. (The case was first reported by multiple stock-news sites, including MarketWatch and SeekingAlpha.)
“As alleged, Honig and his associates engaged in brazen market manipulation that advanced their financial interests while fleecing innocent investors and undermining the integrity of our securities markets,” an SEC senior associate Enforcement Division director, Sanjay Wadhwa, said today in a news release. “They failed to appreciate, however, the SEC’s resolve to relentlessly pursue and punish participants in microcap fraud schemes.”
According to the 53-page SEC complaint, Frost, Honig, and eight others allegedly violated securities law by secretly agreeing to promote one another's stocks — the group allegedly coordinated which stocks to buy. In some cases, the group then drafted fancy press releases announcing that Frost and his companies, including OPKO, were planning big investments in these new firms. (Some of the press materials wound up getting published on stock sites, including SeekingAlpha and others.) Other participants in the scheme allegedly traded stocks to pretend random citizens were interested in the otherwise worthless companies.
And $5,400 to @FLGovScott on July 31. And $10K to the RNC in June/July— David Smiley (@NewsbySmiley) September 7, 2018
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The list of scammers who get Keys To The City Of Miami keeps growing. #miami #becausemiami #WTF #MMGA @BillyCorben @AlfredSpellman #scammers #cityofmiami @cityofmiami @MarcACaputo @FelonyMiami @jerryiannelli pic.twitter.com/xuMAGyf9D4— al crespo (@crespogram) September 7, 2018
If the fraud charges hold, they will represent a major stain on Miami's science museum. (It didn't help that Frost was otherwise an infamous climate-change skeptic.) Though the facility was beset by funding woes and construction delays, the building has been heralded as a major civic success in a town not otherwise known for building public gathering spaces and educational facilities. As blogger Al Crespo noted moments ago, Frost recently received the key to the City of Miami.
Of course, this is South Florida, so the public goodwill could last only so long.
This is a breaking story. This post will be updated.