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Phillip Frost
Phillip Frost

Former Ladenburg Chairman Settles With SEC Over Pump-and-Dump Scheme

Former Ladenburg Thalmann Chairman Phillip Frost has agreed to pay a $5.5 million penalty to settle SEC charges against him.

Phillip Frost, biotech billionaire and former chairman of Ladenburg Thalmann Financial Services, settled with the Securities and Exchange Commission over his alleged involvement in a market manipulation scheme that fleeced investors out of over $27 million.

Without admitting or denying the allegations, Frost agreed to pay a $5.5 million penalty; he’ll also be prohibited from trading in penny stocks, according to a statement. OPKO Health, his pharmaceutical company, will pay a $100,000 fine.  

“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,” Frost said in a statement.

According to the SEC's complaint, Frost was one of 10 individuals charged in the pump-and-dump scheme that lasted from 2013 to 2018. The scheme was led by Florida investor Barry Honig, who bought large quantities of three microcap companies at steep discounts. To artificially boost the stock prices, the alleged fraudsters illegally promoted the stocks and manipulated trading in them. They then offloaded the stocks, generating over $27 million. 

In September, Frost stepped down from his position as chairman of Ladenburg Thalmann, one of the largest independent broker/dealer networks with some 4,300 advisors. The board replaced him with Richard Lampen, president and CEO of the company. Adam Malamed, executive vice president and chief operating officer, will join the board. 

“The allegations in the SEC complaint that led to this settlement were unrelated to Ladenburg, its subsidiaries and business, as well as Dr. Frost’s former board responsibilities or role as a shareholder of Ladenburg,” said Joseph Kuo, a spokesperson for Ladenburg. 

Frost became non-executive chairman of the board at Ladenburg Thalmann in 2006, and in part with his financial backing, the firm has acquired five broker/dealers: Securities America, Triad Advisors, Investacorp, Securities Service Network and KMS Financial Services. Under his board leadership, the firm has become one of the most aggressive acquirers in the independent space.

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