Federal securities regulators on Friday filed civil fraud charges against BioChemics Inc. of Danvers and its chief executive, alleging that he lied to investors in a scheme to raise $9 million.
The Securities and Exchange Commission said BioChemics and its chief, John Masiz of Topsfield, and two other men ran a fraudulent scheme that raised at least $9 million from 70 investors in 19 states, according to a complaint filed in federal court in Boston. The scheme was underway from 2009 until 2012, the regulators alleged. Masiz had previously been sanctioned by the SEC in a different securities fraud case.
According to the complaint, Masiz and two men hired to help attract investors misrepresented the company’s progress with its drugs under development—creams and gels so that drugs can be delivered by applying them to the skin. Masiz and the agents allegedly touted research-and-development collaborations last year that had either already ended or never started. They also misled investors, the SEC alleged, about the results of clinical trials and the value of the company.
The defendants failed to disclose to investors Masiz had been the subject of a prior SEC fraud action, regulators said. They allegedly also told investors that their funds were going to clinical trials and operating expenses, when in fact money was used to pay for Masiz’s personal expenses, including meals, massages and sporting goods, the complaint said. One of the men used funds to pay for his leased BMW.
Jason C. Moreau, a lawyer for the company and Masiz, said in a statement, “We find the SEC’s allegations in this matter to be entirely without merit. BioChemics is a very promising company with a bright future. Both John Masiz and BioChemics believe its transdermal technology is revolutionary and will have an enormous impact in the pharmaceutical industry.’’ He said BioChemics and Masiz “look forward to their day in court.”
In 2004, the SEC barred Masiz for five years from serving as an officer or director of a public company in a case brought against him and VASO Active Pharmaceuticals, Inc., a BioChemics subsidiary.
The regulators are seeking to again bar Masiz from serving as an officer or director of a public company. They are also looking to force the defendants to give back the money they made in the scheme, and to impose monetary penalties.
The other defendants who allegedly helped sell the securities are Craig Medoff of New York City and Gregory S. Kroning of Norwood, N.J. Medoff in 1995 was permanently barred from working for a brokerage firm or investment company and the same year pled guilty to two counts of conspiracy to commit securities fraud in a criminal case. He could not be reached for comment.
Kroning was barred from the industry for a year by the New York Stock Exchange and is not affiliated with a broker-dealer, the SEC said. His attorney declined to comment on the BioChemics case Friday.