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SEC Enters Final Judgment Against Biotechnology Executive for Defrauding Investors

On April 2, 2020 the United States District Court of Massachusetts entered a judgment against Patrick Muraca and his biotechnology companies, NanoMolecularDX, LLC(Nano) and MetaboRX LLC(Metabo) for defrauding investors.

According to the complaint, Muraca began soliciting potential investors to invest in his newly formed biopharmaceutical development companies, Nano and Metabo, in the spring of 2016.

Muraca allegedly represented to investors their funds would be used to develop and market products for early detection of cancer and other diseases. Metabo and Nano’s websites also described their in-depth scientific approach to developing innovative medical products to solicit investors.

Despite this representation, within weeks of receiving the first investments in Nano and Metabo, Muraca allegedly began using the funds for personal expenses. The complaint recounts dozens of instances where Muraca allegedly wired company investor funds to his personal bank account, or simply wrote himself checks from the investor funds. On one occasion, Muraca allegedly directed a hopeful investor to unknowingly wire their investment funds directly into his personal bank account. The SEC alleges Muraca regularly used Nano and Metaba investor funds to pay various personal expenses including his mortgage and purchasing luxury goods. He also allegedly paid bills owed by his fiancé’s restaurant business using investor funds.

The complaint describes how Muraca would send investors extremely detailed monthly company updates describing the developmental progress made possible by investor funds, which also included solicitations to invest more money.  At no point did Muraca convey to investors he was using much of their investments for personal expenses. Muraca also failed to inform investors that both Nano and Metoba’s LLC registration filed with the state of Massachusetts stated their business purpose as “Serving Food; Restaurant.” The complaint alleges Muraca knowingly lied to investors about how their funds were being allocated and he omitted any disclosure that investors funds were continually used to pay personal expenses. Muraca continued to solicit potential and existing investors until July of 2017.

In total, Nano and Metabo received approximately $1.2 million in funding from at least 15 investors. The SEC alleges Muraca misappropriated over $400,000 of investor funds by spending on personal expenses and funding his fiancé’s restaurant business.

On April 2, 2020 court entered final judgment, permanently enjoining Muraca from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, barring Muraca from acting as an officer or director of a public company. The judgment requires Muraca to pay over $400,000 in disgorgement.

You can find more information on this case and access the SEC Complaint at the following link https://www.sec.gov/litigation/litreleases/2020/lr24789.htm. If you have any questions about this or other securities-related issues, please contact Tomlinson & Shapiro, P.C. at (312) 715-8770.

 

Michael Shapiro
(312) 715-8770
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