SEC charges Marlborough's Lemelson Capital with fraud
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Emmanuel Lemelson, chief investment officer for Lemelson Capital Management
A Marlborough hedge fund adviser and his investment firm are being charged by the U.S. Securities and Exchange Commission with profiting more than $1.3 million after driving down the price of a California pharmaceutical company.
In a civil complaint filed in federal court Wednesday, the SEC charged Gregory Lemelson of Lemelson Capital Management with issuing false information about Ligand Pharmaceuticals after Lemelson took a short position in the company in May 2014 of behalf of a hedge fund he advised and partly owned.
Ligand’s stock lost more a third of its value during Lemelson’s alleged scheme, according to the SEC complaint.
Lemelson allegedly made a series of false statements to shake investor confidence in the company, including written reports, interviews and social media, claiming the company was “teetering on the brink of bankruptcy," according to the SEC.
Lemelson allegedly said Ligand’s investor relations firm agreed with him that its flagship Hepatitis D drug Promacta was going to become obsolete, the SEC said.
According to the SEC, Lemelson cited a European doctor’s negative views on the same drug. That doctor, however, was the largest investor in the Amvona Fund, the hedge fund Lemelson advised.
“While short-sellers are free to express their opinions about particular companies, they may not bolster those opinions with false statements, which is what we allege Lemelson did here,” said David Becker, an assistant director in the SEC’s Division of Enforcement, in a statement.
The SEC seeks to have Lemelson, his firm and the Amvona Fund return their allegeldy ill-gotten gains with interest and pay additional penalties.
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