The following lawsuit is the absolute best source
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Posted On: 01/22/2021 3:50:25 PM
The following lawsuit is the absolute best source I've seen for understanding how the #shortmafia operates. In particular, how they operate against a small biotech company using social media and manipulative trading tactics:
Full Lawsuit
https://docplayer.net/194431520-Filed-new-yor...-2020.html
The shorts engage in a multi-front war when they intend to destroy a company, hence the length of the lawsuit narrative. I have attempted to edit the document to make it more readable and to get rid of non-relevant content:
CHARGE:
1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X ABEONA THERAPEUTICS INC., vs. Plaintiff, MATT GRAVITT, JOSEPH J. SPIEGEL, RICHARD UNDERBRINK, MAKO RESEARCH, and JOHN DOE AND JANE DOE #1 through #20, the last twenty (20) names being fictitious and unknown to the plaintiff, the persons or parties intended being the additional traders and/or additional author(s) behind Mako Research as described in the Complaint…
INTRODUCTION:
Plaintiff Abeona Therapeutics Inc. (Abeona) is an early-stage biopharmaceutical company focused on finding a cure for rare and horrific genetic skin disorders that primarily afflict children. Abeona is on the cusp of a breakthrough, having just received clearance from the FDA to proceed with a Phase 3 trial for one of its treatments. …
Defendants have been engaging in their fraudulent scheme to profit from illegal and manipulative short selling in Abeona’s stock. They do so by coordinating the publication of false and misleading hit pieces, masquerading as stock research articles, with manipulative trading and quoting activity in Abeona’s stock.
In particular, and as explained in much greater detail below, Defendants conspired to drive down the price of stock by timing the publication of false and misleading hit pieces with illicit, manipulative trading tactics and quoting activity, including naked short sales. Abeona takes Defendants illegal profit-scheme seriously, and intends to counter it on all fronts…
Short sellers like Defendants are stock traders who sell stock that they do not own to make a profit when the price of a stock goes down. In brief, a short seller locates stock to borrow, sells it for the current market price, and then hopes the price of that stock will decline so he can purchase it in the open market at a cheaper price before returning it to the borrower.
A short seller is required to locate stock to borrow before selling it to ensure that he has a reasonable belief that the stock can be delivered on a specific date. While short selling itself is not illegal, naked short selling, selling stock short without first borrowing shares is plainly illegal under the federal (and many state) securities laws. Naked short selling is sometimes coupled with efforts to fraudulently manipulate the market to drive down the stock price because short sellers need to be certain that the price of the stock will decrease. Most commonly, these efforts take the form of disseminating false negative information about the company to the investing public. If the short seller successfully convinces investors that the company represents a worthless investment, plummeting the company s stock price, the short seller can walk away with significant profits, while the company s financial well-being and reputation are severely and irreparably damaged. This type of fraudulent scheme has been an unfortunate element of the public stock markets for decades.
With the rise of the Internet and the advent of social media, short selling and attendant market manipulation has developed into a complex, highly sophisticated enterprise. Once a short seller establishes a short position (i.e., once he locates shares to borrow and sells a stock), a network of individuals goes to work, writing, publishing, and promoting what appear to be legitimate works of journalism aimed at exposing negative facts about a company to the investing community, but are in fact complete fabrications. The conspirators benefit from the anonymity permitted by Internet-based publishing, and their hit pieces reach a vast audience almost instantaneously by linking to the articles on sites like Twitter and Facebook. These negative, false, and misleading articles naturally have the tendency to depress the price of the stock. Often, and as happened here, the trading defendants engage in market manipulation immediately preceding, or contemporaneously with, the publication of the article, further exerting downward price pressure on the stock all to the trader’s economic benefit while harming the legitimate investors economic interests. Before the company even realizes it has been victimized by a short attack, the company and its stockholders have suffered severe and irreparable harm.
Short attackers like Defendants are not shy about the real-world damage they cause, not just to the companies whose stock price they manipulate, but to innocent mom and pop investor-bystanders in fact, they revel in it.
Plaintiff Abeona has been the victim of numerous short attacks at the hands of Defendants over the past four years. During that time, Defendants have published three hit pieces about Abeona on the website SeekingAlpha.com under the pseudonym Mako Research.
Defendants articles have sought to plunge the value of Abeona’s stock by falsely presenting to the investing public unfounded accusations, including regarding the very science underlying Abeona s product development that its ongoing work has been validating.
At first blush, the Mako Research articles like those of all short attackers resemble legitimate exposé pieces. However, Mako Research is not in the field of investigative journalism, and its articles are not meant to educate. To the contrary, as described throughout this Complaint, Mako Research exists only as a mechanism to perpetrate market manipulation in aid of short selling.
One need only review the social media postings of those connected to Mako Research and other faux investment research outfits to gain clarity on their purpose. For example, on April 6, 2014, Defendant and Mako Research author Matt Gravitt, who had previously published hit pieces using his own name, gave advance notice of an article he was about to publish concerning TherapeuticsMD, tweeting wheewwwiieee this piece on txmd is gonna be naughty, followed by, if anyone on here that follows me is long on txmd, I am sorry in advance In conjunction with disseminating false or misleading negative information, short attackers engage in a host of deceptive and illegal trading practices that are designed to artificially manipulate stock prices. These tactics include (as explained in greater detail below) naked short selling, spoofing, layering and wash trades, all of which are plainly illegal under the federal (and many state) securities laws.
The trader Defendants in this case engaged in a host of such illegal, manipulative trading tactics that were intended to, and had the effect of, artificially depressing Abeona s stock price so that these Defendants could profit from their illicit scheme, at the expense of Abeona s bona fide stockholders and to the detriment of Abeona and its business goals Since 2016, Defendants have schemed to depress the stock price of Abeona s stock through publishing hit pieces followed by manipulative short selling activity all to profit at the expense of the bagholder. But Defendants scheme also damages the primary target of the hit pieces Abeona. Abeona s real-world damages take many different forms. Abeona, as the issuer, transacts in its own stock, which means it uses its stock as compensation to pay employees and consultants. When Defendants manipulate the price of Abeona s stock downward, Abeona has to provide more stock for the same amount of compensation. Abeona s artificially depressed stock can also negatively impact Abeona s ability to finance its operations, which threatens its ability to complete costly efforts to develop a cure for RDEB. Abeona seeks here to redress these wrongs.
DEFENDANTS:
Defendant Matt Gravitt is a resident of the State of Texas. Gravitt is a trader in Abeona stock and believed to be one of the authors of Mako Research. His twitter handle is believed to Twitter, https//twitter.com/psbcap (last visited Jan. 29, 2020).
Defendant Joseph J. Spiegel is a resident of the state of Wyoming. He is a trader in Abeona stock. His twitter handle is believed to Twitter, https//twitter.com/BuyersStrike (last visited Mar. 3, 2020). He also has a blog, where he writes posts on biotechnology companies, including Abeona. BuyersStrike! A New Kind of Assassin, https//buyersstrike.wordpress.com/ (last visited Mar. 3, 2020). On January 2, 2007, Spiegel was charged by the Securities and Exchange Commission (SEC) with securities fraud in connection with naked short sales. http// Spiegel has engaged in manipulative trading in Abeona stock in coordination with the publication of hit pieces.
Defendant Richard Underbrink is a resident of Texas. Underbrink is a trader and has worked with Gravitt and others in connection with the operation of, and creation of hit piece articles by Mako Research…Defendants John and Jane Does 1-20 are individuals whose identities are not yet known, but who have conspired with Defendants to execute the scheme described herein. Plaintiff has made a diligent inquiry to determine the party’s identities and have included an affirmation to that effect at Exhibit A.
Defendants Gravitt, Spiegel, Underbrink, and Does 1-20 engaged in manipulative trading, including naked short selling and non-bona fide quoting activity in Abeona s stock. Defendants Gravitt, Spiegel, Underbrink, and Does 1-20 are collectively referred to as Defendant Traders.
Defendant Mako Research LLC (Mako Research) is a sham entity, directly or indirectly utilized by Gravitt, Spiegel, Underbrink, and Does 1-20 to perpetuate their fraud on the market as the purported author of web-published articles masquerading as investment analyses. Mako Research is not a legitimate registered investment analyst. Nor is it a FINRA member firm or registered in any capacity with the SEC. Plaintiff has made a diligent inquiry to determine contact information for Mako Research and has included an affirmation to that effect at Exhibit A. RELATED PERSON 26. William Bill Robert Hunter is believed to be behind the twitter which has a bio that says, Biotech trading addict with no hobbies.
ABEONA CEO IS AN IRANIAN-AMERICAN:
Steven H. Rouhandeh has served as Abeona s Executive Chairman since January 7
SHORT SELLING/NAKED SHORT:
Background on Legitimate Short Selling: Short selling is an investment strategy that seeks to profit from the decline in stock prices. A short sale is the sale of a stock that an investor does not own or a sale which is consummated by the delivery of a stock borrowed by, or for the account of, the investor. Brokerage firms typically lend stock to customers who engage in short sales, using the firm s own inventory, the margin account of another of the firm s customers, or another lender. Short sales are normally settled by the delivery of a security borrowed by or on behalf of the investor. The investor later closes out the position by returning the borrowed security to the stock lender, typically by purchasing securities on the open market.
Investors who sell stock short typically believe the price of the stock will fall and hope to buy the stock at the lower price and make a profit. 8 If the price of the stock rises, short sellers who buy it at the higher price will incur a loss.
Short selling, on its own, is legal and thought by many to serve useful purposes to the markets. Short sellers purportedly keep overvalued stock prices in check and provide a source of liquidity to the markets. However, short selling is also a practice subject to abuse.
The stock of public companies like Abeona trade on securities exchanges, such as the NASDAQ, where the forces of supply and demand set the price for those stocks listed on the 8 Short selling is also used by market makers and others to provide liquidity in response to unanticipated demand, or to hedge the risk of an economic long position in the same security or in a related security exchange. In a perfect world, accurate information regarding a company or its business is disseminated rapidly to investors and stock analysts who in turn make trading decisions based upon their assessment of how the information impacts the stock s value, good or bad. Recognizing the central role that accurate information plays in the efficient and fair setting of market prices, the securities laws are intended to encourage or require companies to disclose certain information that is material to investors trading decisions.
Because the securities markets do not, however, operate in a perfect world, there are many methods by which scammers may game the system. Unscrupulous investors often seek to exploit the markets reliance upon information in setting stock prices by disseminating misinformation regarding a particular stock. For instance, in the classic pump and dump scheme, insiders or others will, after buying some of the company s stock, leak positive rumors regarding the company in the hopes the price increases, at which time the stock can be sold for a profit.
The opposite of a pump and dump scheme though no less fraudulent, manipulative, and harmful to the companies targeted as victims are schemes to short and distort a company s stock, also known as a bear raid or short attack. In a short attack, dishonest investors, acting alone or in collusion, will sell a company s stock short, and then employ various methods designed to drive the price down so the short positions can be bought-in or covered with lower priced stock, netting a contrived profit for the short seller.
Typically, the short attacker will disseminate false and misleading rumors about the company on internet chat boards and similar sites under a pseudonym. The short attackers will often pose as investment research analysts or use names or credentials that imply, they are connected to regulators or the securities industry, lending false credibility to the disparaging rumors they spread. In the spirit of fake news, the short attackers might pen seemingly legitimate articles presenting their purported opinions about the company, often referred to as hit pieces.
The net effect is that those holding the stock may sell it based on the misinformation, potentially at a loss. At the same time, the short attack scammers cover their short positions at these deflated prices, turning for themselves a handsome profit.
While short selling is legal (if not in connection with a coordinated effort to manipulate a company s stock price, such as through false and misleading hit pieces) there are methods of short selling that are plainly illegal, namely naked short selling. Naked short selling is the term used to describe short selling that is done without first locating or borrowing the shares that the trader intends to sell short, and is a violation of 17 CFR (b)(1). A trader who naked shorts a stock is likely to fail to deliver the stock to the buyer, because the short seller has not located or borrowed stock to deliver to the buyer. This can lead to additional violations of the federal securities laws. See 17 CFR Market manipulators have other means to illicitly and artificially manipulate stock prices available to them.
MARKET MANIPULATION (LAYERING, SPOOFING, WASH TRADES):
For example, layering and spoofing are forms of market manipulation that typically involve the placement of non-bona fide orders intended to create the appearance of trading activity. Layering involves placing limit orders on one side of the market to create the appearance of a change in the supply or demand for the stock. Spoofing involves placing an order with the intention of causing a reaction in the market, canceling that order before it is filled, and entering an order on the other side of the market.
Market participants can use layering or spoofing to drive down the price of a stock. They can do so by layering non-bona fide limit orders on the sell side of the market to create the appearance of an increase in the supply of stock for sale. This will cause the price of the stock to decline. In much the same vein, market participants can use spoofing to place numerous non-bona fide orders to trigger trading algorithms to sell stock, which causes the price of the stock to decline. Layering and spoofing are well-recognized as illegal tactics used to manipulate securities markets.
Pre-arranged cross-trading or wash trades is a form of market manipulation where one or more related market participants arrange to buy and sell stock between related accounts or to each other to create the false appearance of volume and price movement. This type of market manipulation occurs most frequently in thinly traded securities because the lower daily volume makes it more likely the conspiring cross-traders will trade with each other. Prearranged cross-trades can be used to drive down a stock s price when the cross traders arrange for the transaction to occur below the market price. Numerous pre-arranged cross-trades at declining prices can create the appearance of a sell-off in the stock and cause other traders, or algorithms, to join in the sell-off, creating an even larger decline in the stock s price. While wash trades creates the appearance of volume, in reality, the cross-traders are trading the same shares back and forth between themselves. Pre-arranged cross trading, or wash trades, is a well-known tactic employed for the purpose of illegal market manipulation.
SOCIAL MEDIA TACTICS:
Defendants and Related Person Openly Discuss Manipulating Biotech Stocks on Twitter.
Defendants and Related Person are active on Twitter, where they discuss trading in biotechnology companies, such as Abeona. Tweets by Defendants and Related Person are often disparaging of the retail investors who fall for their schemes. On September 5, (believed to be Richard Underbrink) tweeted that retail investors should be defined as a person affected with extreme mental retardation. These unwitting investors who are left holding the bag after a short attack are a source of great entertainment for Defendants.
On Twitter, Defendants and Related Person are open about their recurring manipulative short attack scheme to write an article for Seeking Alpha to put downward pressure on a stock. 10 On January 10, 2014, Richard Underbrink tweeted and Bill Hunter can one of you guys bust out your seeking alpha pen on IMMU? I’m short 4k from $6.00 Need a flush. 11 In this tweet, Underbrink is unequivocally asking for his friends to write a hit piece on IMMU to drive the price down so he can buy back his 4,000-share short position at a profit. Moreover, he is specific about the price below which he needs the stock to fall. Bill Hunter and Matt Gravitt both liked the post. A screenshot of this post is below at Figure 1. 9 SQ is the stock ticker symbol for Square, Inc., a technology company. 10 Seeking Alpha is a crowd-sourced content service that publishes articles on financial markets. 11 IMMU is the symbol for Immunomedics Inc., a biotechnology company.
Defendant Spiegel has attacked Abeona on both his Twitter and his blog. In May 2015, he engaged in a twitter exchange about his determination that Plasmatech Pharmaceuticals (Abeona s predecessor) has its corporate headquarters in a UPS office in Dallas, TX. See Figure 2. This claim, that Abeona is based out of a strip mall in Dallas, Texas, also appears in one of the hit pieces written by Mako Research. See Mako Research, Collision with Reality Sends Abeona Stock Spiraling Lower (July 31, 2019), Exhibit F. In the article, Mako Research states, just a few years ago before the current biotech bubble reached 1999 levels of mania, Abeona (then known as Plasmatech Biopharmaceuticals), was run out of a strip mall in Dallas.
Throughout 2018, Spiegel continued spreading his message that he believed ABEO was a scam. On May 18, 2018, he responded to a tweet about Abeona, "$ABEO has been a scam since day (and name and ticker 1). It is a multiple reverse merger piece of shit." On November 26, 2018, Spiegel responded to another tweet about Abeona, "It is not possible to erase the filth at $ABEO. $ABEO was born of filth, of Mark Ahn and Steve Rouhandeh. Past is always prologue. Pedigree always counts. And ALL reverse mergers are scams, in one way or another..." … It is a multiple reverse merger piece of shit put together by this sleazebag.
On November 5, 2018, Spiegel taunted shareholders of ABEO when he tweeted, $ABEO getting bagholders ready for the pivot to the next hype-filled thing..... while burning their cash.... On August 23, 2019, Spiegel created a blog post sarcastically entitled Well Done Abeona (ABEO). Well Done Abeona (ABEO), BuyersStrike! (Aug. 23, 2019), http//buyersstrike.wordpress.com. The blog post called Abeona a reverse merger mega stinker, and chastised Abeona s management for the stock price hitting a new low. Id. The post ended by reminding readers that ALL REVERSE MERGERS ARE SCAMS. ALL OF THEM. EVERY SINGLE ONE. IN ONE WAY OR ANOTHER. Id. (capitalization in original).
JOE SPIEGEL IS A FRAUDSTER:
Defendant Joe Spiegel was Previously Charged by the SEC for Similar Manipulative Conduct.
On January 4, 2007, the SEC charged Defendant Joseph Spiegel with securities fraud in connection with his activity when he was a portfolio manager for Spinner Global Technology Fund, Ltd. (SGTF), a $200 million hedge fund. See Complaint, SEC v. Joseph J. Spiegel, https// (Jan. 4, 2007). According to the SEC Complaint, Spiegel engaged in an unlawful trading scheme... in violation of the antifraud and registration provisions of the federal securities laws in connection with three unregistered securities offerings, which are commonly referred to as PIPEs (Private Investment in Public Equity). Id. at 1. After Spiegel agreed to invest in three PIPE transactions, he sold short the PIPE issuer s stock through naked short sales in Canada. Id. at 2. Later, Siegel used the PIPE shares to close out some or all of the... short positions a practice Spiegel knew or was reckless in not knowing was prohibited by the registration provisions of the federal securities laws. In connection with each of the three PIPEs, to avoid detection and regulatory scrutiny, Spiegel employed wash sales and matched orders to make it appear that he was covering SGTF s pre-effective date short positions with open market stock purchases when in fact the covering transactions were not done with open market shares because the hedge fund was on both sides of the trades and covered the short positions with its PIPE shares. Id.
On January 24, 2007, Spiegel entered a settlement agreement with the SEC for the conduct described in the above paragraph. In re Joseph Spiegel, Investment Advisors Act Release No. 2585, https// (Jan. 24, 2007). Under the SEC settlement order, Spiegel agreed to be barred from association with any investment advisor for three years.
MANIPULATING STOCK PRICE:
Since At Least December 2016, Defendants Have Published Numerous Hit Pieces Targeting Abeona And Have Engaged in Manipulative Short Selling of Abeona s Stock.
Defendant Traders have engaged in a pattern of manipulative trading in ABEO since at least December as set forth in more detail below, the general practice of Defendant Traders was to conspire with Defendant Mako Research to engage in manipulative short selling activity of ABEO ahead of a Mako Research article to profit off the stock market’s reaction to the article. Defendant Traders would sell short ABEO stock, without first borrowing it before Defendant Mako Research published a negative research article. Defendant Traders profited from this scheme when Mako Research s negative news article drove down the price of ABEO stock. Defendant Traders would further depress the price of ABEO by their involvement in the display of large non bona fide quotes well outside the range of publicly displayed quotes in ABEO. After successfully depressing ABEO s stock price, Defendant Traders were able to profit by closing out their short position by buying ABEO at a lower price than the price at which they sold short, a lower price that was the direct result of their coordinated, manipulative tactics.
On Monday December 12, 2016, Seeking Alpha published an article written by Defendant Mako Research entitled Abeona Stock Promotions, Fraud Convictions, and Demonstrably Unviable Science A Sell With 92% Downside. This negative, false, and misleading article was a hit piece on Abeona.
The article claims that the science behind Abeona s drugs in development is demonstrably unviable with numerous irrefutable flaws that will lead to failure.
Specifically, the article attempts to show multiple serious flaws in Abeona s trial design, but the purported flaws are simply made up. Id. Mako Research attempts to scare its readers by suggesting ABEO is only hoping or praying that its method for treating Sanfilippo will be successful. Id. It further alleges that Abeona made a rookie mistake by the choices the company made in formulating its gene therapy approach. Id. The article claims that Abeona has set a bar for itself that is so low, whatever their trial shows should be clinically worthless.
According to the article, the Company s competitors offer superior treatments in an already miniscule total addressable market, making the Company s market valuation unstainable even if the gene therapy treatments worked. The article concludes that the price of ABEO is inflated, and as a result, is set to decline 92% as its science fails.
Important for Defendants scheme, the article goes to great lengths to use technical scientific terms and graphics to appear legitimate to the average reader. However, the article is purposefully designed to scare ABEO shareholders into selling their stock for the benefit of Defendant Traders.
The article also attacks Abeona s management, calling them the worst biotech executives of the last 20+ years, who have accumulated multi-decade track records of shareholder wreckage. Id.
The December 2016 Article was, at a minimum, grossly misleading, if not outright fraudulent. To start, the article gets the science wrong. The numerous PhD scientists employed by Abeona to work on its MPS III gene therapy did not choose the wrong promoter in formulating their gene therapy approach. Nor is it correct to characterize the rigorous approach and decision making by Abeona PhD scientists as hoping or praying, or rookie. The article also gets a number of facts wrong. For example, it claims that National Children s Hospital is the sole clinical site, when the company also has clinical sites in Spain and Australia. In addition, the article makes false accusation about Abeona s leadership and the involvement of David Blech.
Defendant Traders began their manipulative trading in ABEO on the trading day prior to the release of the December 2016 Article. That morning, ABEO opened at $5.85, which was consistent with its prior open and closing prices. Minutes before the market close (from to), however, Defendant Traders sold short more than 84,400 shares of ABEO, at prices between $5.12 and $5.17. Over the course of the trading day, the price of ABEO declined approximately 13% to close at $5.12. This precipitous decline cannot be explained by negative publicity related to Abeona, as there was no company specific or industry news on that day.
On December 12, 2016, ABEO opened at $5.05. The Seeking Alpha article was released at 930 a.m. and ABEO s stock price declined by 12% to $4.45 on volume of more than 2.2 million shares, representing a 964% increase in volume from the prior two trading days. Throughout the day, Defendant Traders engaged in quoting and trading large, outsized offers (some of which were never executed) that corresponded with the dramatic decline in ABEO s share price. Other than the hit piece on Seeking Alpha, there was no company-specific or industry news on December 12, the dramatic spike in ABEO s volume that occurred on December 12 can be seen in Figure 8. When compared to the volume in the two weeks before and after the Seeking Alpha article, it is clear that the article had an enormous impact on the trading in ABEO on December 12, This, of course, was all part of Defendant s plan to drive down the price of ABEO. Figure Defendant Traders sold ABEO short ahead of the Seeking Alpha article s publication. Defendant Traders short selling activity was done without obtaining a locate prior to each short sale.
On December 12, 2016, after the publication of the article, Defendant Traders provided sham quotations in ABEO, using market manipulation techniques such as spoofing, layering, and wash trades to further drive down the price of ABEO.
After the December 2016 Article was published, and the price of ABEO had fallen by about $1.40 per share, Defendant Traders purchased shares of ABEO to cover their short positions. As a direct result of their coordinated manipulation, they were able to purchase ABEO at a lower price than the price at which they sold their shares, thereby profiting off of the decline in ABEO that resulted from the December 2016 Article.
A similar event occurred a month later when, on Monday, January 9, 2017, Seeking Alpha published an article by Defendant Mako Research entitled Abeona Director Implicated in Pump and Dump Lawsuit with SEC Investigation, Price Target of Zero (the January 2017 Article). See Ex. E. This second hit piece contained numerous negative, false, and misleading statements about Abeona and its board of directors.
The article stated that Abeona s board was comprised of stock promoters and that one of its directors was involved in an SEC investigation into a pump and dump scheme at that director s prior company.
Based on this accusation, Mako Research claims that shares of Abeona (NASDAQ ABEO) are objectively without value and apparently exist to enrich insiders at the expense of investors. Id. The article purports that it will publish future reports that will further elaborate on why ABEO s science is unviable and set to fail.
The article also mocks legitimate Wall Street analysts, from Cantor Fitzgerald and Jefferies, who called Mako Research s prior ABEO analysis factually incorrect and misleading, weaving a theory that these analysts have a history of promoting fraudulent companies.
Mako Research concludes by downgrading ABEO to a Strong Sell from a Sell, and reducing its price target to zero. Id. At the time the article was written, ABEO was trading around $6.00 per share.
The January 2017 Article was, at minimum, grossly misleading, if not outright fraudulent. Abeona s board is not filled with stock promoters. The company s board of directors consists of numerous accomplished scientists and doctors. The article accuses Abeona (and its predecessor) of paying a company called Mission IR to publish positive news articles about itself. However, neither Abeona nor its predecessors paid or otherwise influenced Mission IR to write positive articles about the company.
Defendant Traders began manipulating the price of ABEO on January 6, 2017 the trading day prior to the release of the January 2017 Article. Defendant Traders were involved in the display of large outsized quotes and were behind the execution of several large block size transaction indicative of manipulative trading activity. Defendant Traders executed multiple naked short sale transactions on January 6, Defendant Traders executed these short sale transactions without first locating the shares of ABEO to borrow.
On January 9, 2017, after the Seeking Alpha article was published, ABEO dropped 10% to an intraday low of $5.46. Defendant Traders were able to profit off the decline in ABEO s share price by buying-in their short position at a lower price than their short sales.
In February 2017, Mako Research posted a comment in the comments section of its January 2017 Article in which it admitted that its anonymous author was short ABEO If ABEO returns to where I shorted it in the $8s, I just add to the position aggressively. In the mean time [sic], it’s chopping around with a downtrend and the stock remains worthless. Id., comment on Feb. 14, p.m.
The activity described above serves as background of a pattern of manipulative trading and quoting activity by Defendants upon the stock of Abeona. In 2019, Defendants Continued to Coordinate Their Manipulative Trading with Defendant Mako Research s Articles to Profit Off the Resulting Decline in ABEO Stock
Defendants have continued to engage in manipulative trading and quoting activity in ABEO, with more recent attacks in July and December.
On July 31, 2019, Seeking Alpha published an article by Defendant Mako Research entitled Collision with Reality Sends Abeona Stock Spiraling Lower. This third hit piece reiterated many of the same points of its prior articles, and contained similar negative, false, and misleading statements about Abeona and its board.
In the article, Mako Research restated its claim made two-and-a-half years prior that Abeona is a low-quality biotech with little hope of ever turning into a viable company. July 2019 Article at Ex. F. The article has little new information, except a Form 8-k issued by the company, which it incorrectly interprets to imply that the FDA rejected Abeona s proposed trial design.
According to the article, the short has finally started to work as market confusion clears and Abeona s potential insolvency comes into focus. Id. The article also questions Abeona s solvency, alleging that it has burned $57m of cash over the last 12 months and has failed to raise the equity capital necessary to continue as a going concern.
The article concludes that the stock is worth less than net cash, and should be valued at $0.75.
The July 2019 Article on Seeking Alpha was, at minimum, grossly misleading, if not outright fraudulent. The article alleges that Abeona s Chairman Steven Rouhandeh has presided over many shareholder wipeouts over his career as a stock promoter. Id. Mr. Rouhandeh s successful career in private equity was based on honest investment, not stock promotion. In addition, Mr. Rouhandeh has only presided over one public company Abeona. So, the claim he presided over many shareholder wipeouts is impossible as a matter of logic.
Defendants began short selling ABEO around the close of trading on July 30, 2019 the trading day prior to the release of the Seeking Alpha article. Defendants did not locate shares to borrow prior to selling short ABEO stock. In addition, Defendants were involved in the display of a significant number of large, outsized public quotes posted near the close on July 30, 2019, some of which were never executed. This type of quoting activity is indicative of spoofing and/or layering activity with the intent of manipulating the price of ABEO.
On July 31, 2019, ABEO s stock price opened at $2.97 and declined almost 13% to close at $2.59. The volume of ABEO shares traded that day spiked to over 2.1 million shares, which was more than 3.5 times the daily volume of the prior two trading days.
Defendants bought-in their short positions of ABEO at a lower price after the July 2019 Article and manipulative trading depressed the price of ABEO stock. Defendants were able to profit from buying in their short positions at a lower price than their short sales.
In September 2019, Mako Research commented on its July 2019 Article, I covered most my short near the lows because there’s much left to play for here on the short but this is obviously a POS and should not be purchased.
Defendant Traders engaged in multiple instances of manipulative trading in ABEO in December 2019.
On December 3, 2019, ABEO opened at $3.72 and reached a high of $3.84. Defendant Traders engaged in wash trades of ABEO designed to depress the price of ABEO stock. As discussed above, wash trades give the appearance of increased volume, but in reality, the wash trades are sales of the same shares back and forth amongst manipulative traders with no beneficial change in ownership of the shares. When these trades are executed at declining prices, they can drive down the price of a stock.
On December 3, 2019, Defendant Traders engaged in the following wash trading in ABEO a. At 145226, two trades of ABEO totaling 16,100 shares, executed at a price of $3.435; b. At 145234, a trade of 25,000 ABEO shares, executed at $3.43; and c. At 150000 and 150015, two trades of ABEO, executed totaling 100,000 shares at a price of $3.40.
These trades accounted for 11% of ABEO s total trading volume that day. These trades were wash trades designed to give the appearance of downward pressure on ABEO. Defendant Traders orchestrated these trades and profited from the resulting decline in ABEO s stock price.
By the end of the trading day on December 3, 2019, the share price of ABEO dropped 12% and closed at $3.25. This decline cannot be explained by any negative publicity involving Abeona, as there was no company-specific or industry news that day.
Defendant Traders also engaged in manipulative wash trades in ABEO on December 4, 2019 that were designed to further depress the price of ABEO stock. 103. On December 4, 2019, ABEO opened at $3.26, and reached a high of $3.29. Shortly after the open, Defendant Traders engaged in the following wash trades a. At 93425, a block trade of 124,294 shares of ABEO at $3.22; b. At 100940 and 100950, two block trades totaling 58,000 shares of ABEO at $3.20; and c. At 102418, an additional block trade of 50,000 shares of ABEO at $3.05.
These four trades set off a series of additional trades in which the price of ABEO dropped to a low of $3.00. More block trades in ABEO were executed over the course of the day at prices around $3.00 a share, including a large block trade of 73,393. Defendant Traders executed this block trade at $3.00 when the publicly displayed bid at the time was $3.03. Defendant Traders intentionally executed this transaction at a price below the bid to drive down the price of ABEO. In fact, all of the trades by Defendant Traders over the course of the day were wash trades designed to put downward pressure on ABEO.
Defendant Traders orchestrated these trades and profited from the decline in ABEO s stock price. ABEO closed on December 4, 2019 at $2.99 8% lower than the prior day s closing price.
Defendant Traders also engaged in manipulative wash trades in ABEO on December 5, 2019 that were designed to further depress the price of ABEO stock.
On December 5, 2019 at 100529, a block trade of 50,000 shares of ABEO was executed at $3.00. At 140706, another block trade of 50,000 ABEO shares was executed at $2.93. These trades were wash trades by Defendant Traders designed to give the appearance of downward pressure on ABEO. Defendant Traders orchestrated these trades and profited from the decline in ABEO stock.
The price of ABEO fell 25% over these three trading days on no company specific or industry news. The transactions described above represented approximately 45% of the volume of ABEO traded on those days. Defendant Traders engaged in these cross trades to depress the price of ABEO in order to profit on its short position, or prior short sales, in ABEO. Abeona Was Harmed as a Result of Defendant Traders Manipulative Trading Activity.
Defendant Traders manipulative trading activity, usually timed to coincide with Defendant Mako Research s negative research, depressed the stock price of ABEO repeatedly in 2016, 2017, and 2019. Defendant Traders manipulative trading depressed ABEO 25% in December 2016, 10% in January 2017, 13% in July 2019, and 25% in December 2019.
Figure 9 shows the price of ABEO between January 2, 2015 and January 2, 2020. The graph shows how Defendant Traders have been successful in depressing ABEO through its short attacks and manipulative trading and quoting activity. In 2018, when there were no short attacks, ABEO traded between $10 and $20 per share. Since Defendant s short attacks in 2019, ABEO has consistently traded below $5 per share.
MANIPULATION = DILUTION:
Stock options provided as compensation to employees give employees the right to buy company stock at a specified price known as the strike price. Employers set the strike price at the market price for the stock so that when the stock price goes up, employees can sell their shares at a profit.
The lower a company s stock price, the more stock the company must grant to employees to provide the same level of compensation. For example, assume a company wished to provide $5,000 in compensation to an employee through grants of stock options. If the company s stock was trading at $50 per share, the company should grant the employee 100 stock options. If, however, the company s stock was only trading at $5 per share, the company must grant the employee 1,000 shares for the employee to receive the same monetary value of compensation.
Abeona granted stock options to its employees on multiple occasions during the time period at issue in this Complaint. On three specific occasions December 13, 2016, July 31, 2019, and September 30, 2019 Abeona granted stock when the price of ABEO was artificially depressed as a result of the cumulative short attacks by Defendants. Abeona reasonably relied on the market price when setting its strike price for its employee stock options.
On December 13, 2016, Abeona granted its employees options at a $4.45 strike price. The adjusted close price for ABEO on December 13, 2016 was $4.90. The total number of options granted by Abeona on December 13, 2016 was 962,500.
On July 31, 2019, Abeona granted its employees options at a $2.59 strike price. The adjusted close price for ABEO on July 31, 2019 was $2.59. The total number of options granted by Abeona on July 31, 2019 was 103,400.
On September 30, 2019, Abeona granted its employees options at a $2.26 strike price. The adjusted close price for ABEO on September 30, 2019 was $2.26. The total number of options granted by Abeona on September 30, 2019 was 2,200.
At the points in time when Abeona granted those options, the market price for ABEO was artificially depressed as a direct result of Defendants manipulative scheme. Were it not for Defendants hit pieces and manipulative trading, Abeona could have granted options at a much higher strike price. Instead, Abeona was required to use much more of its currency to provide the same level of compensation to its employees.
Full Lawsuit
https://docplayer.net/194431520-Filed-new-yor...-2020.html
The shorts engage in a multi-front war when they intend to destroy a company, hence the length of the lawsuit narrative. I have attempted to edit the document to make it more readable and to get rid of non-relevant content:
CHARGE:
1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X ABEONA THERAPEUTICS INC., vs. Plaintiff, MATT GRAVITT, JOSEPH J. SPIEGEL, RICHARD UNDERBRINK, MAKO RESEARCH, and JOHN DOE AND JANE DOE #1 through #20, the last twenty (20) names being fictitious and unknown to the plaintiff, the persons or parties intended being the additional traders and/or additional author(s) behind Mako Research as described in the Complaint…
INTRODUCTION:
Plaintiff Abeona Therapeutics Inc. (Abeona) is an early-stage biopharmaceutical company focused on finding a cure for rare and horrific genetic skin disorders that primarily afflict children. Abeona is on the cusp of a breakthrough, having just received clearance from the FDA to proceed with a Phase 3 trial for one of its treatments. …
Defendants have been engaging in their fraudulent scheme to profit from illegal and manipulative short selling in Abeona’s stock. They do so by coordinating the publication of false and misleading hit pieces, masquerading as stock research articles, with manipulative trading and quoting activity in Abeona’s stock.
In particular, and as explained in much greater detail below, Defendants conspired to drive down the price of stock by timing the publication of false and misleading hit pieces with illicit, manipulative trading tactics and quoting activity, including naked short sales. Abeona takes Defendants illegal profit-scheme seriously, and intends to counter it on all fronts…
Short sellers like Defendants are stock traders who sell stock that they do not own to make a profit when the price of a stock goes down. In brief, a short seller locates stock to borrow, sells it for the current market price, and then hopes the price of that stock will decline so he can purchase it in the open market at a cheaper price before returning it to the borrower.
A short seller is required to locate stock to borrow before selling it to ensure that he has a reasonable belief that the stock can be delivered on a specific date. While short selling itself is not illegal, naked short selling, selling stock short without first borrowing shares is plainly illegal under the federal (and many state) securities laws. Naked short selling is sometimes coupled with efforts to fraudulently manipulate the market to drive down the stock price because short sellers need to be certain that the price of the stock will decrease. Most commonly, these efforts take the form of disseminating false negative information about the company to the investing public. If the short seller successfully convinces investors that the company represents a worthless investment, plummeting the company s stock price, the short seller can walk away with significant profits, while the company s financial well-being and reputation are severely and irreparably damaged. This type of fraudulent scheme has been an unfortunate element of the public stock markets for decades.
With the rise of the Internet and the advent of social media, short selling and attendant market manipulation has developed into a complex, highly sophisticated enterprise. Once a short seller establishes a short position (i.e., once he locates shares to borrow and sells a stock), a network of individuals goes to work, writing, publishing, and promoting what appear to be legitimate works of journalism aimed at exposing negative facts about a company to the investing community, but are in fact complete fabrications. The conspirators benefit from the anonymity permitted by Internet-based publishing, and their hit pieces reach a vast audience almost instantaneously by linking to the articles on sites like Twitter and Facebook. These negative, false, and misleading articles naturally have the tendency to depress the price of the stock. Often, and as happened here, the trading defendants engage in market manipulation immediately preceding, or contemporaneously with, the publication of the article, further exerting downward price pressure on the stock all to the trader’s economic benefit while harming the legitimate investors economic interests. Before the company even realizes it has been victimized by a short attack, the company and its stockholders have suffered severe and irreparable harm.
Short attackers like Defendants are not shy about the real-world damage they cause, not just to the companies whose stock price they manipulate, but to innocent mom and pop investor-bystanders in fact, they revel in it.
Plaintiff Abeona has been the victim of numerous short attacks at the hands of Defendants over the past four years. During that time, Defendants have published three hit pieces about Abeona on the website SeekingAlpha.com under the pseudonym Mako Research.
Defendants articles have sought to plunge the value of Abeona’s stock by falsely presenting to the investing public unfounded accusations, including regarding the very science underlying Abeona s product development that its ongoing work has been validating.
At first blush, the Mako Research articles like those of all short attackers resemble legitimate exposé pieces. However, Mako Research is not in the field of investigative journalism, and its articles are not meant to educate. To the contrary, as described throughout this Complaint, Mako Research exists only as a mechanism to perpetrate market manipulation in aid of short selling.
One need only review the social media postings of those connected to Mako Research and other faux investment research outfits to gain clarity on their purpose. For example, on April 6, 2014, Defendant and Mako Research author Matt Gravitt, who had previously published hit pieces using his own name, gave advance notice of an article he was about to publish concerning TherapeuticsMD, tweeting wheewwwiieee this piece on txmd is gonna be naughty, followed by, if anyone on here that follows me is long on txmd, I am sorry in advance In conjunction with disseminating false or misleading negative information, short attackers engage in a host of deceptive and illegal trading practices that are designed to artificially manipulate stock prices. These tactics include (as explained in greater detail below) naked short selling, spoofing, layering and wash trades, all of which are plainly illegal under the federal (and many state) securities laws.
The trader Defendants in this case engaged in a host of such illegal, manipulative trading tactics that were intended to, and had the effect of, artificially depressing Abeona s stock price so that these Defendants could profit from their illicit scheme, at the expense of Abeona s bona fide stockholders and to the detriment of Abeona and its business goals Since 2016, Defendants have schemed to depress the stock price of Abeona s stock through publishing hit pieces followed by manipulative short selling activity all to profit at the expense of the bagholder. But Defendants scheme also damages the primary target of the hit pieces Abeona. Abeona s real-world damages take many different forms. Abeona, as the issuer, transacts in its own stock, which means it uses its stock as compensation to pay employees and consultants. When Defendants manipulate the price of Abeona s stock downward, Abeona has to provide more stock for the same amount of compensation. Abeona s artificially depressed stock can also negatively impact Abeona s ability to finance its operations, which threatens its ability to complete costly efforts to develop a cure for RDEB. Abeona seeks here to redress these wrongs.
DEFENDANTS:
Defendant Matt Gravitt is a resident of the State of Texas. Gravitt is a trader in Abeona stock and believed to be one of the authors of Mako Research. His twitter handle is believed to Twitter, https//twitter.com/psbcap (last visited Jan. 29, 2020).
Defendant Joseph J. Spiegel is a resident of the state of Wyoming. He is a trader in Abeona stock. His twitter handle is believed to Twitter, https//twitter.com/BuyersStrike (last visited Mar. 3, 2020). He also has a blog, where he writes posts on biotechnology companies, including Abeona. BuyersStrike! A New Kind of Assassin, https//buyersstrike.wordpress.com/ (last visited Mar. 3, 2020). On January 2, 2007, Spiegel was charged by the Securities and Exchange Commission (SEC) with securities fraud in connection with naked short sales. http// Spiegel has engaged in manipulative trading in Abeona stock in coordination with the publication of hit pieces.
Defendant Richard Underbrink is a resident of Texas. Underbrink is a trader and has worked with Gravitt and others in connection with the operation of, and creation of hit piece articles by Mako Research…Defendants John and Jane Does 1-20 are individuals whose identities are not yet known, but who have conspired with Defendants to execute the scheme described herein. Plaintiff has made a diligent inquiry to determine the party’s identities and have included an affirmation to that effect at Exhibit A.
Defendants Gravitt, Spiegel, Underbrink, and Does 1-20 engaged in manipulative trading, including naked short selling and non-bona fide quoting activity in Abeona s stock. Defendants Gravitt, Spiegel, Underbrink, and Does 1-20 are collectively referred to as Defendant Traders.
Defendant Mako Research LLC (Mako Research) is a sham entity, directly or indirectly utilized by Gravitt, Spiegel, Underbrink, and Does 1-20 to perpetuate their fraud on the market as the purported author of web-published articles masquerading as investment analyses. Mako Research is not a legitimate registered investment analyst. Nor is it a FINRA member firm or registered in any capacity with the SEC. Plaintiff has made a diligent inquiry to determine contact information for Mako Research and has included an affirmation to that effect at Exhibit A. RELATED PERSON 26. William Bill Robert Hunter is believed to be behind the twitter which has a bio that says, Biotech trading addict with no hobbies.
ABEONA CEO IS AN IRANIAN-AMERICAN:
Steven H. Rouhandeh has served as Abeona s Executive Chairman since January 7
SHORT SELLING/NAKED SHORT:
Background on Legitimate Short Selling: Short selling is an investment strategy that seeks to profit from the decline in stock prices. A short sale is the sale of a stock that an investor does not own or a sale which is consummated by the delivery of a stock borrowed by, or for the account of, the investor. Brokerage firms typically lend stock to customers who engage in short sales, using the firm s own inventory, the margin account of another of the firm s customers, or another lender. Short sales are normally settled by the delivery of a security borrowed by or on behalf of the investor. The investor later closes out the position by returning the borrowed security to the stock lender, typically by purchasing securities on the open market.
Investors who sell stock short typically believe the price of the stock will fall and hope to buy the stock at the lower price and make a profit. 8 If the price of the stock rises, short sellers who buy it at the higher price will incur a loss.
Short selling, on its own, is legal and thought by many to serve useful purposes to the markets. Short sellers purportedly keep overvalued stock prices in check and provide a source of liquidity to the markets. However, short selling is also a practice subject to abuse.
The stock of public companies like Abeona trade on securities exchanges, such as the NASDAQ, where the forces of supply and demand set the price for those stocks listed on the 8 Short selling is also used by market makers and others to provide liquidity in response to unanticipated demand, or to hedge the risk of an economic long position in the same security or in a related security exchange. In a perfect world, accurate information regarding a company or its business is disseminated rapidly to investors and stock analysts who in turn make trading decisions based upon their assessment of how the information impacts the stock s value, good or bad. Recognizing the central role that accurate information plays in the efficient and fair setting of market prices, the securities laws are intended to encourage or require companies to disclose certain information that is material to investors trading decisions.
Because the securities markets do not, however, operate in a perfect world, there are many methods by which scammers may game the system. Unscrupulous investors often seek to exploit the markets reliance upon information in setting stock prices by disseminating misinformation regarding a particular stock. For instance, in the classic pump and dump scheme, insiders or others will, after buying some of the company s stock, leak positive rumors regarding the company in the hopes the price increases, at which time the stock can be sold for a profit.
The opposite of a pump and dump scheme though no less fraudulent, manipulative, and harmful to the companies targeted as victims are schemes to short and distort a company s stock, also known as a bear raid or short attack. In a short attack, dishonest investors, acting alone or in collusion, will sell a company s stock short, and then employ various methods designed to drive the price down so the short positions can be bought-in or covered with lower priced stock, netting a contrived profit for the short seller.
Typically, the short attacker will disseminate false and misleading rumors about the company on internet chat boards and similar sites under a pseudonym. The short attackers will often pose as investment research analysts or use names or credentials that imply, they are connected to regulators or the securities industry, lending false credibility to the disparaging rumors they spread. In the spirit of fake news, the short attackers might pen seemingly legitimate articles presenting their purported opinions about the company, often referred to as hit pieces.
The net effect is that those holding the stock may sell it based on the misinformation, potentially at a loss. At the same time, the short attack scammers cover their short positions at these deflated prices, turning for themselves a handsome profit.
While short selling is legal (if not in connection with a coordinated effort to manipulate a company s stock price, such as through false and misleading hit pieces) there are methods of short selling that are plainly illegal, namely naked short selling. Naked short selling is the term used to describe short selling that is done without first locating or borrowing the shares that the trader intends to sell short, and is a violation of 17 CFR (b)(1). A trader who naked shorts a stock is likely to fail to deliver the stock to the buyer, because the short seller has not located or borrowed stock to deliver to the buyer. This can lead to additional violations of the federal securities laws. See 17 CFR Market manipulators have other means to illicitly and artificially manipulate stock prices available to them.
MARKET MANIPULATION (LAYERING, SPOOFING, WASH TRADES):
For example, layering and spoofing are forms of market manipulation that typically involve the placement of non-bona fide orders intended to create the appearance of trading activity. Layering involves placing limit orders on one side of the market to create the appearance of a change in the supply or demand for the stock. Spoofing involves placing an order with the intention of causing a reaction in the market, canceling that order before it is filled, and entering an order on the other side of the market.
Market participants can use layering or spoofing to drive down the price of a stock. They can do so by layering non-bona fide limit orders on the sell side of the market to create the appearance of an increase in the supply of stock for sale. This will cause the price of the stock to decline. In much the same vein, market participants can use spoofing to place numerous non-bona fide orders to trigger trading algorithms to sell stock, which causes the price of the stock to decline. Layering and spoofing are well-recognized as illegal tactics used to manipulate securities markets.
Pre-arranged cross-trading or wash trades is a form of market manipulation where one or more related market participants arrange to buy and sell stock between related accounts or to each other to create the false appearance of volume and price movement. This type of market manipulation occurs most frequently in thinly traded securities because the lower daily volume makes it more likely the conspiring cross-traders will trade with each other. Prearranged cross-trades can be used to drive down a stock s price when the cross traders arrange for the transaction to occur below the market price. Numerous pre-arranged cross-trades at declining prices can create the appearance of a sell-off in the stock and cause other traders, or algorithms, to join in the sell-off, creating an even larger decline in the stock s price. While wash trades creates the appearance of volume, in reality, the cross-traders are trading the same shares back and forth between themselves. Pre-arranged cross trading, or wash trades, is a well-known tactic employed for the purpose of illegal market manipulation.
SOCIAL MEDIA TACTICS:
Defendants and Related Person Openly Discuss Manipulating Biotech Stocks on Twitter.
Defendants and Related Person are active on Twitter, where they discuss trading in biotechnology companies, such as Abeona. Tweets by Defendants and Related Person are often disparaging of the retail investors who fall for their schemes. On September 5, (believed to be Richard Underbrink) tweeted that retail investors should be defined as a person affected with extreme mental retardation. These unwitting investors who are left holding the bag after a short attack are a source of great entertainment for Defendants.
On Twitter, Defendants and Related Person are open about their recurring manipulative short attack scheme to write an article for Seeking Alpha to put downward pressure on a stock. 10 On January 10, 2014, Richard Underbrink tweeted and Bill Hunter can one of you guys bust out your seeking alpha pen on IMMU? I’m short 4k from $6.00 Need a flush. 11 In this tweet, Underbrink is unequivocally asking for his friends to write a hit piece on IMMU to drive the price down so he can buy back his 4,000-share short position at a profit. Moreover, he is specific about the price below which he needs the stock to fall. Bill Hunter and Matt Gravitt both liked the post. A screenshot of this post is below at Figure 1. 9 SQ is the stock ticker symbol for Square, Inc., a technology company. 10 Seeking Alpha is a crowd-sourced content service that publishes articles on financial markets. 11 IMMU is the symbol for Immunomedics Inc., a biotechnology company.
Defendant Spiegel has attacked Abeona on both his Twitter and his blog. In May 2015, he engaged in a twitter exchange about his determination that Plasmatech Pharmaceuticals (Abeona s predecessor) has its corporate headquarters in a UPS office in Dallas, TX. See Figure 2. This claim, that Abeona is based out of a strip mall in Dallas, Texas, also appears in one of the hit pieces written by Mako Research. See Mako Research, Collision with Reality Sends Abeona Stock Spiraling Lower (July 31, 2019), Exhibit F. In the article, Mako Research states, just a few years ago before the current biotech bubble reached 1999 levels of mania, Abeona (then known as Plasmatech Biopharmaceuticals), was run out of a strip mall in Dallas.
Throughout 2018, Spiegel continued spreading his message that he believed ABEO was a scam. On May 18, 2018, he responded to a tweet about Abeona, "$ABEO has been a scam since day (and name and ticker 1). It is a multiple reverse merger piece of shit." On November 26, 2018, Spiegel responded to another tweet about Abeona, "It is not possible to erase the filth at $ABEO. $ABEO was born of filth, of Mark Ahn and Steve Rouhandeh. Past is always prologue. Pedigree always counts. And ALL reverse mergers are scams, in one way or another..." … It is a multiple reverse merger piece of shit put together by this sleazebag.
On November 5, 2018, Spiegel taunted shareholders of ABEO when he tweeted, $ABEO getting bagholders ready for the pivot to the next hype-filled thing..... while burning their cash.... On August 23, 2019, Spiegel created a blog post sarcastically entitled Well Done Abeona (ABEO). Well Done Abeona (ABEO), BuyersStrike! (Aug. 23, 2019), http//buyersstrike.wordpress.com. The blog post called Abeona a reverse merger mega stinker, and chastised Abeona s management for the stock price hitting a new low. Id. The post ended by reminding readers that ALL REVERSE MERGERS ARE SCAMS. ALL OF THEM. EVERY SINGLE ONE. IN ONE WAY OR ANOTHER. Id. (capitalization in original).
JOE SPIEGEL IS A FRAUDSTER:
Defendant Joe Spiegel was Previously Charged by the SEC for Similar Manipulative Conduct.
On January 4, 2007, the SEC charged Defendant Joseph Spiegel with securities fraud in connection with his activity when he was a portfolio manager for Spinner Global Technology Fund, Ltd. (SGTF), a $200 million hedge fund. See Complaint, SEC v. Joseph J. Spiegel, https// (Jan. 4, 2007). According to the SEC Complaint, Spiegel engaged in an unlawful trading scheme... in violation of the antifraud and registration provisions of the federal securities laws in connection with three unregistered securities offerings, which are commonly referred to as PIPEs (Private Investment in Public Equity). Id. at 1. After Spiegel agreed to invest in three PIPE transactions, he sold short the PIPE issuer s stock through naked short sales in Canada. Id. at 2. Later, Siegel used the PIPE shares to close out some or all of the... short positions a practice Spiegel knew or was reckless in not knowing was prohibited by the registration provisions of the federal securities laws. In connection with each of the three PIPEs, to avoid detection and regulatory scrutiny, Spiegel employed wash sales and matched orders to make it appear that he was covering SGTF s pre-effective date short positions with open market stock purchases when in fact the covering transactions were not done with open market shares because the hedge fund was on both sides of the trades and covered the short positions with its PIPE shares. Id.
On January 24, 2007, Spiegel entered a settlement agreement with the SEC for the conduct described in the above paragraph. In re Joseph Spiegel, Investment Advisors Act Release No. 2585, https// (Jan. 24, 2007). Under the SEC settlement order, Spiegel agreed to be barred from association with any investment advisor for three years.
MANIPULATING STOCK PRICE:
Since At Least December 2016, Defendants Have Published Numerous Hit Pieces Targeting Abeona And Have Engaged in Manipulative Short Selling of Abeona s Stock.
Defendant Traders have engaged in a pattern of manipulative trading in ABEO since at least December as set forth in more detail below, the general practice of Defendant Traders was to conspire with Defendant Mako Research to engage in manipulative short selling activity of ABEO ahead of a Mako Research article to profit off the stock market’s reaction to the article. Defendant Traders would sell short ABEO stock, without first borrowing it before Defendant Mako Research published a negative research article. Defendant Traders profited from this scheme when Mako Research s negative news article drove down the price of ABEO stock. Defendant Traders would further depress the price of ABEO by their involvement in the display of large non bona fide quotes well outside the range of publicly displayed quotes in ABEO. After successfully depressing ABEO s stock price, Defendant Traders were able to profit by closing out their short position by buying ABEO at a lower price than the price at which they sold short, a lower price that was the direct result of their coordinated, manipulative tactics.
On Monday December 12, 2016, Seeking Alpha published an article written by Defendant Mako Research entitled Abeona Stock Promotions, Fraud Convictions, and Demonstrably Unviable Science A Sell With 92% Downside. This negative, false, and misleading article was a hit piece on Abeona.
The article claims that the science behind Abeona s drugs in development is demonstrably unviable with numerous irrefutable flaws that will lead to failure.
Specifically, the article attempts to show multiple serious flaws in Abeona s trial design, but the purported flaws are simply made up. Id. Mako Research attempts to scare its readers by suggesting ABEO is only hoping or praying that its method for treating Sanfilippo will be successful. Id. It further alleges that Abeona made a rookie mistake by the choices the company made in formulating its gene therapy approach. Id. The article claims that Abeona has set a bar for itself that is so low, whatever their trial shows should be clinically worthless.
According to the article, the Company s competitors offer superior treatments in an already miniscule total addressable market, making the Company s market valuation unstainable even if the gene therapy treatments worked. The article concludes that the price of ABEO is inflated, and as a result, is set to decline 92% as its science fails.
Important for Defendants scheme, the article goes to great lengths to use technical scientific terms and graphics to appear legitimate to the average reader. However, the article is purposefully designed to scare ABEO shareholders into selling their stock for the benefit of Defendant Traders.
The article also attacks Abeona s management, calling them the worst biotech executives of the last 20+ years, who have accumulated multi-decade track records of shareholder wreckage. Id.
The December 2016 Article was, at a minimum, grossly misleading, if not outright fraudulent. To start, the article gets the science wrong. The numerous PhD scientists employed by Abeona to work on its MPS III gene therapy did not choose the wrong promoter in formulating their gene therapy approach. Nor is it correct to characterize the rigorous approach and decision making by Abeona PhD scientists as hoping or praying, or rookie. The article also gets a number of facts wrong. For example, it claims that National Children s Hospital is the sole clinical site, when the company also has clinical sites in Spain and Australia. In addition, the article makes false accusation about Abeona s leadership and the involvement of David Blech.
Defendant Traders began their manipulative trading in ABEO on the trading day prior to the release of the December 2016 Article. That morning, ABEO opened at $5.85, which was consistent with its prior open and closing prices. Minutes before the market close (from to), however, Defendant Traders sold short more than 84,400 shares of ABEO, at prices between $5.12 and $5.17. Over the course of the trading day, the price of ABEO declined approximately 13% to close at $5.12. This precipitous decline cannot be explained by negative publicity related to Abeona, as there was no company specific or industry news on that day.
On December 12, 2016, ABEO opened at $5.05. The Seeking Alpha article was released at 930 a.m. and ABEO s stock price declined by 12% to $4.45 on volume of more than 2.2 million shares, representing a 964% increase in volume from the prior two trading days. Throughout the day, Defendant Traders engaged in quoting and trading large, outsized offers (some of which were never executed) that corresponded with the dramatic decline in ABEO s share price. Other than the hit piece on Seeking Alpha, there was no company-specific or industry news on December 12, the dramatic spike in ABEO s volume that occurred on December 12 can be seen in Figure 8. When compared to the volume in the two weeks before and after the Seeking Alpha article, it is clear that the article had an enormous impact on the trading in ABEO on December 12, This, of course, was all part of Defendant s plan to drive down the price of ABEO. Figure Defendant Traders sold ABEO short ahead of the Seeking Alpha article s publication. Defendant Traders short selling activity was done without obtaining a locate prior to each short sale.
On December 12, 2016, after the publication of the article, Defendant Traders provided sham quotations in ABEO, using market manipulation techniques such as spoofing, layering, and wash trades to further drive down the price of ABEO.
After the December 2016 Article was published, and the price of ABEO had fallen by about $1.40 per share, Defendant Traders purchased shares of ABEO to cover their short positions. As a direct result of their coordinated manipulation, they were able to purchase ABEO at a lower price than the price at which they sold their shares, thereby profiting off of the decline in ABEO that resulted from the December 2016 Article.
A similar event occurred a month later when, on Monday, January 9, 2017, Seeking Alpha published an article by Defendant Mako Research entitled Abeona Director Implicated in Pump and Dump Lawsuit with SEC Investigation, Price Target of Zero (the January 2017 Article). See Ex. E. This second hit piece contained numerous negative, false, and misleading statements about Abeona and its board of directors.
The article stated that Abeona s board was comprised of stock promoters and that one of its directors was involved in an SEC investigation into a pump and dump scheme at that director s prior company.
Based on this accusation, Mako Research claims that shares of Abeona (NASDAQ ABEO) are objectively without value and apparently exist to enrich insiders at the expense of investors. Id. The article purports that it will publish future reports that will further elaborate on why ABEO s science is unviable and set to fail.
The article also mocks legitimate Wall Street analysts, from Cantor Fitzgerald and Jefferies, who called Mako Research s prior ABEO analysis factually incorrect and misleading, weaving a theory that these analysts have a history of promoting fraudulent companies.
Mako Research concludes by downgrading ABEO to a Strong Sell from a Sell, and reducing its price target to zero. Id. At the time the article was written, ABEO was trading around $6.00 per share.
The January 2017 Article was, at minimum, grossly misleading, if not outright fraudulent. Abeona s board is not filled with stock promoters. The company s board of directors consists of numerous accomplished scientists and doctors. The article accuses Abeona (and its predecessor) of paying a company called Mission IR to publish positive news articles about itself. However, neither Abeona nor its predecessors paid or otherwise influenced Mission IR to write positive articles about the company.
Defendant Traders began manipulating the price of ABEO on January 6, 2017 the trading day prior to the release of the January 2017 Article. Defendant Traders were involved in the display of large outsized quotes and were behind the execution of several large block size transaction indicative of manipulative trading activity. Defendant Traders executed multiple naked short sale transactions on January 6, Defendant Traders executed these short sale transactions without first locating the shares of ABEO to borrow.
On January 9, 2017, after the Seeking Alpha article was published, ABEO dropped 10% to an intraday low of $5.46. Defendant Traders were able to profit off the decline in ABEO s share price by buying-in their short position at a lower price than their short sales.
In February 2017, Mako Research posted a comment in the comments section of its January 2017 Article in which it admitted that its anonymous author was short ABEO If ABEO returns to where I shorted it in the $8s, I just add to the position aggressively. In the mean time [sic], it’s chopping around with a downtrend and the stock remains worthless. Id., comment on Feb. 14, p.m.
The activity described above serves as background of a pattern of manipulative trading and quoting activity by Defendants upon the stock of Abeona. In 2019, Defendants Continued to Coordinate Their Manipulative Trading with Defendant Mako Research s Articles to Profit Off the Resulting Decline in ABEO Stock
Defendants have continued to engage in manipulative trading and quoting activity in ABEO, with more recent attacks in July and December.
On July 31, 2019, Seeking Alpha published an article by Defendant Mako Research entitled Collision with Reality Sends Abeona Stock Spiraling Lower. This third hit piece reiterated many of the same points of its prior articles, and contained similar negative, false, and misleading statements about Abeona and its board.
In the article, Mako Research restated its claim made two-and-a-half years prior that Abeona is a low-quality biotech with little hope of ever turning into a viable company. July 2019 Article at Ex. F. The article has little new information, except a Form 8-k issued by the company, which it incorrectly interprets to imply that the FDA rejected Abeona s proposed trial design.
According to the article, the short has finally started to work as market confusion clears and Abeona s potential insolvency comes into focus. Id. The article also questions Abeona s solvency, alleging that it has burned $57m of cash over the last 12 months and has failed to raise the equity capital necessary to continue as a going concern.
The article concludes that the stock is worth less than net cash, and should be valued at $0.75.
The July 2019 Article on Seeking Alpha was, at minimum, grossly misleading, if not outright fraudulent. The article alleges that Abeona s Chairman Steven Rouhandeh has presided over many shareholder wipeouts over his career as a stock promoter. Id. Mr. Rouhandeh s successful career in private equity was based on honest investment, not stock promotion. In addition, Mr. Rouhandeh has only presided over one public company Abeona. So, the claim he presided over many shareholder wipeouts is impossible as a matter of logic.
Defendants began short selling ABEO around the close of trading on July 30, 2019 the trading day prior to the release of the Seeking Alpha article. Defendants did not locate shares to borrow prior to selling short ABEO stock. In addition, Defendants were involved in the display of a significant number of large, outsized public quotes posted near the close on July 30, 2019, some of which were never executed. This type of quoting activity is indicative of spoofing and/or layering activity with the intent of manipulating the price of ABEO.
On July 31, 2019, ABEO s stock price opened at $2.97 and declined almost 13% to close at $2.59. The volume of ABEO shares traded that day spiked to over 2.1 million shares, which was more than 3.5 times the daily volume of the prior two trading days.
Defendants bought-in their short positions of ABEO at a lower price after the July 2019 Article and manipulative trading depressed the price of ABEO stock. Defendants were able to profit from buying in their short positions at a lower price than their short sales.
In September 2019, Mako Research commented on its July 2019 Article, I covered most my short near the lows because there’s much left to play for here on the short but this is obviously a POS and should not be purchased.
Defendant Traders engaged in multiple instances of manipulative trading in ABEO in December 2019.
On December 3, 2019, ABEO opened at $3.72 and reached a high of $3.84. Defendant Traders engaged in wash trades of ABEO designed to depress the price of ABEO stock. As discussed above, wash trades give the appearance of increased volume, but in reality, the wash trades are sales of the same shares back and forth amongst manipulative traders with no beneficial change in ownership of the shares. When these trades are executed at declining prices, they can drive down the price of a stock.
On December 3, 2019, Defendant Traders engaged in the following wash trading in ABEO a. At 145226, two trades of ABEO totaling 16,100 shares, executed at a price of $3.435; b. At 145234, a trade of 25,000 ABEO shares, executed at $3.43; and c. At 150000 and 150015, two trades of ABEO, executed totaling 100,000 shares at a price of $3.40.
These trades accounted for 11% of ABEO s total trading volume that day. These trades were wash trades designed to give the appearance of downward pressure on ABEO. Defendant Traders orchestrated these trades and profited from the resulting decline in ABEO s stock price.
By the end of the trading day on December 3, 2019, the share price of ABEO dropped 12% and closed at $3.25. This decline cannot be explained by any negative publicity involving Abeona, as there was no company-specific or industry news that day.
Defendant Traders also engaged in manipulative wash trades in ABEO on December 4, 2019 that were designed to further depress the price of ABEO stock. 103. On December 4, 2019, ABEO opened at $3.26, and reached a high of $3.29. Shortly after the open, Defendant Traders engaged in the following wash trades a. At 93425, a block trade of 124,294 shares of ABEO at $3.22; b. At 100940 and 100950, two block trades totaling 58,000 shares of ABEO at $3.20; and c. At 102418, an additional block trade of 50,000 shares of ABEO at $3.05.
These four trades set off a series of additional trades in which the price of ABEO dropped to a low of $3.00. More block trades in ABEO were executed over the course of the day at prices around $3.00 a share, including a large block trade of 73,393. Defendant Traders executed this block trade at $3.00 when the publicly displayed bid at the time was $3.03. Defendant Traders intentionally executed this transaction at a price below the bid to drive down the price of ABEO. In fact, all of the trades by Defendant Traders over the course of the day were wash trades designed to put downward pressure on ABEO.
Defendant Traders orchestrated these trades and profited from the decline in ABEO s stock price. ABEO closed on December 4, 2019 at $2.99 8% lower than the prior day s closing price.
Defendant Traders also engaged in manipulative wash trades in ABEO on December 5, 2019 that were designed to further depress the price of ABEO stock.
On December 5, 2019 at 100529, a block trade of 50,000 shares of ABEO was executed at $3.00. At 140706, another block trade of 50,000 ABEO shares was executed at $2.93. These trades were wash trades by Defendant Traders designed to give the appearance of downward pressure on ABEO. Defendant Traders orchestrated these trades and profited from the decline in ABEO stock.
The price of ABEO fell 25% over these three trading days on no company specific or industry news. The transactions described above represented approximately 45% of the volume of ABEO traded on those days. Defendant Traders engaged in these cross trades to depress the price of ABEO in order to profit on its short position, or prior short sales, in ABEO. Abeona Was Harmed as a Result of Defendant Traders Manipulative Trading Activity.
Defendant Traders manipulative trading activity, usually timed to coincide with Defendant Mako Research s negative research, depressed the stock price of ABEO repeatedly in 2016, 2017, and 2019. Defendant Traders manipulative trading depressed ABEO 25% in December 2016, 10% in January 2017, 13% in July 2019, and 25% in December 2019.
Figure 9 shows the price of ABEO between January 2, 2015 and January 2, 2020. The graph shows how Defendant Traders have been successful in depressing ABEO through its short attacks and manipulative trading and quoting activity. In 2018, when there were no short attacks, ABEO traded between $10 and $20 per share. Since Defendant s short attacks in 2019, ABEO has consistently traded below $5 per share.
MANIPULATION = DILUTION:
Stock options provided as compensation to employees give employees the right to buy company stock at a specified price known as the strike price. Employers set the strike price at the market price for the stock so that when the stock price goes up, employees can sell their shares at a profit.
The lower a company s stock price, the more stock the company must grant to employees to provide the same level of compensation. For example, assume a company wished to provide $5,000 in compensation to an employee through grants of stock options. If the company s stock was trading at $50 per share, the company should grant the employee 100 stock options. If, however, the company s stock was only trading at $5 per share, the company must grant the employee 1,000 shares for the employee to receive the same monetary value of compensation.
Abeona granted stock options to its employees on multiple occasions during the time period at issue in this Complaint. On three specific occasions December 13, 2016, July 31, 2019, and September 30, 2019 Abeona granted stock when the price of ABEO was artificially depressed as a result of the cumulative short attacks by Defendants. Abeona reasonably relied on the market price when setting its strike price for its employee stock options.
On December 13, 2016, Abeona granted its employees options at a $4.45 strike price. The adjusted close price for ABEO on December 13, 2016 was $4.90. The total number of options granted by Abeona on December 13, 2016 was 962,500.
On July 31, 2019, Abeona granted its employees options at a $2.59 strike price. The adjusted close price for ABEO on July 31, 2019 was $2.59. The total number of options granted by Abeona on July 31, 2019 was 103,400.
On September 30, 2019, Abeona granted its employees options at a $2.26 strike price. The adjusted close price for ABEO on September 30, 2019 was $2.26. The total number of options granted by Abeona on September 30, 2019 was 2,200.
At the points in time when Abeona granted those options, the market price for ABEO was artificially depressed as a direct result of Defendants manipulative scheme. Were it not for Defendants hit pieces and manipulative trading, Abeona could have granted options at a much higher strike price. Instead, Abeona was required to use much more of its currency to provide the same level of compensation to its employees.
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