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Phillip Frost
Phillip Frost

Ladenburg Replaces Chairman Accused of Pump-and-Dump Scheme

Biotech billionaire Phillip Frost steps down as chairman in the wake of recent SEC allegations. CEO Richard Lampen steps in.

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

Frost, a biotech billionaire, was involved in two of three pump-and-dump schemes that fleeced investors out of over $27 million, the Securities and Exchange Commission alleged last week.

“I have decided to retire from the Ladenburg Board and will concentrate my efforts on OPKO Health and my philanthropic interests,” Frost said in a statement. “As a long-term shareholder, I am confident in Ladenburg’s outlook and look forward to its continued growth and success.”

In an analyst note, Barrington Research, which covers the company, said Frost’s statement was an indication that he would not divest his 35 percent stake in the company. Barrington analysts Alexander Paris and Chris Howe reiterated their “outperform” rating on the company, writing that the firm trades at 0.6 times their 2018 revenue estimate, a discount to LPL Financial, trading at 1.3 times consensus 2018 revenue estimates. 

“We believe [Frost] is doing the right thing for the company, its employees and advisors, and shareholders, as the risk to Ladenburg’s reputation and brand is too great, given recent SEC allegations of securities fraud, to continue his association with the company, despite our confidence/optimism that he will ultimately be vindicated as the process plays out,” the analysts write.

According to the SEC, Frost was one of 10 individuals charged in the market manipulation 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. 

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.

Barrington says Ladenburg has a strong financial position, with $390 million in book value and nearly $250 million in cash.

A spokesman for Ladenburg did not return a request for comment by press time. 

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