November 3, 2019

RE: Frost gang Report

Dear All,

Phillip Frost is the leader of a white collar gang that specializes in market manipulation
and securities fraud, especially pump and dump securities frauds. Frost has consented to
judgment and paid a $5 million fine as a result of securities fraud charges in ​SEC v Honig​.1 As
Bill Alpert wrote in ​Barron’s,​ those charges by the SEC may be only the tip of the iceberg.2
Frost and his gang have done many dirty deeds at dozens of public companies, so there is a lot of
ground to cover in this report. I write to offer my observations and opinions to anyone who is
interested in the fraudulent and illegal activities of the Frost gang. This report touches on a
number of areas related to the Frost gang.
I first came into contact with Frost and his gang in about February of 2011 when I flew
from Minnesota to Miami for a week of business meetings at Frost’s IVAX building. I was
working as outside patent counsel to a company called BioZone. Over the ten years I had
worked with BioZone, BioZone had developed a proprietary drug delivery platform technology
capable of reformulating many existing drugs. BioZone needed capital to grow its R&D and
manufacturing capabilities, and the Frost gang falsely promised that capital to BioZone.
Unfortunately, those 2011 false promises just marked the beginning of seemingly limitless
excretion of lies and frauds by Phillip Frost and his henchmen. The information in this report is
heavily informed and influenced by my own personal experiences with the Frost gang.
This report is meant to be updated over time. It is not even close to complete in its
present form. Scores of new names could be added to the section on Frost gang members and
associates. Many civil lawsuits have not yet been included. Though 30 Frost gang companies
are listed, many are not. In future versions, sections will be added and expanded, new
developments will be incorporated as more information becomes available, and older
information may be deleted in the interest of brevity.
The information in this report has been collected from a variety of sources, and I want to
thank the contributors. First and foremost, I want to thank Teri Buhl. Teri’s reporting at
teribuhl.com has been instrumental in exposing key aspects of the Frost gang. She is a journalist
in the truest sense of the word. Next, I offer thanks to Bill Alpert at ​Barron’s​. Third, I offer
thanks to Chris Carey of sharesleuth.com. Many other business writers have also made valuable
contributions. This category includes Hindenburg Research (Nate Anderson), Research Noir,

https://www.genengnews.com/news/opko-health-ceo-and-chairman-agree-to-pay-5-6m-to-settle-sec-stoc
k-allegations/​ (December 28, 2018 news story)
2
Barron’s​ article)
​https://www.barrons.com/articles/sec-charges-phillip-frost-1536608366​ (​

1
Ozgur Ogut and others. Finally, I want to thank those who have reached out to me by phone,
email and direct messages. Your information and support has been invaluable.

1. New information about the Frost gang:

There has been very little major news about the Frost gang in the last few months.
However, there is a daily stream of new developments related to Frost gang companies, Frost
gang members, and Frost gang litigation. The biggest recent news has been related to ​SEC v
Honig​, including disclosures in that case that the SEC is continuing to investigate the Frost gang
for conduct that post-dates the charges in ​SEC v Honig3 and that the Frost gang is under criminal
investigation by the DOJ.4
Public perception of Frost and his gang is becoming more negative. Many factors have
played a role in this change of perception, including:
-- Continuing and extreme declines in the share prices of Frost gang companies
-- Cumulative effects of various investigative reports on Frost gang activities
-- Publicity and news coverage regarding Frost gang civil litigation
-- High-profile corporate resignations after ​SEC v Honig ​was filed
-- Some coverage of the Frost gang by mainstream media5
Twitter has emerged as a space where information and opinions about the Frost gang is
shared by real people with real identities. The Twitter crowd includes journalists, business
writers, lawyers, investors and scientists. Information on Twitter includes links to new
investigative reports, court documents, SEC filings, commentaries and analyses. It also allows
for the sharing of information with visual impact. For example ...

3
​https://www.courtlistener.com/docket/7822644/157/securities-and-exchange-commission-v-honig/
(August 8, 2019 letter from SEC attorney Nancy Brown to SDNY Judge Edgardo Ramos)
4

https://www.teribuhl.com/2019/05/22/sec-admits-team-honig-is-under-the-criminal-investigation-i-warned-
about-in-2016/​ (May 22, 2019 Teri Buhl story)
5
​https://finance.yahoo.com/news/federal-criminal-probe-launched-connection-193529856.html​ (May 22,
2019 article by Jennifer Schlessinger of CNBC)

2
 Even the message boards, once the secure domain of Frost gang pumpers, have changed
in tone. Here is a recent exemplary snip from the Yahoo message board for OPK:

2. Frost gang members and associates

2.a. Phillip Frost
Phillip Frost is the oldest, richest, and most influential member of the Frost gang. Frost
owns the IVAX building in Miami, which serves as headquarters for the Frost gang. Frost’s
reputation used to be one of the Frost gang’s key assets, until it became widely known that Frost
is a fraudster.
Many, if not most, of Frost’s frauds have not been completely exposed yet.6

2.b. Harvey Kesner

Kesner has been the main attorney for many of the Frost gang’s P&D securities frauds,
including the three P&D frauds described in ​SEC v Honig​. Kesner has not yet been charged by
the SEC or DOJ. Kesner left the New York law firm where he represented the Frost gang in
many P&Ds. Kesner apparently now practices in Florida. Kesner recently published a blog at
the link below. It’s good for a laugh. After all, very few people know more about fraud than
Harvey Kesner.
http://www.bestfinance-blog.com/income-career/attorney-harvey-kesner-discusses-how-foreign-i
nvestors-can-avoid-being-victims-of-financial-fraud/​ (blog by Harvey Kesner)

2.c. Barry Honig

6
​https://www.scribd.com/document/429644254/191010-Frost-as-an-OPK-Short-Seller-Hypothesis
(Pederson letter about possible short-selling of OPK by Frost)

3
 In ​SEC v Honig​, the SEC described Honig as the “primary strategist” of the Frost gang’s
P&D operations. In addition to doing stock frauds in association with Phillip Frost, Honig also
has associated with other groups involved in suspicious activities. One such group included
Joseph Noel, Imran Husain, Gregg Jaclin and David Zazoff.7 Another Honig group includes
Andy and Catherine Defrancesco, Michael Serruya and Brady Cobb.8 Yet another involves
investment banking and brokerage firm Laidlaw & Co.9

2.d. Michael Brauser

Brauser is a defendant in ​SEC v Honig.​ After the SEC charged Brauser in ​SEC v. Honig
he resigned as Executive Chairman of Red Violet (RDVT), but Brauser still apparently controls
RDVT in a consulting or advisory capacity.
https://michaelhbrauser.com/​ (Brauser’s website)

2.e. John Stetson

Stetson is a defendant in ​SEC v Honig​. Stetson is the former CFO at COOL/PTE.
Stetson reportedly was a fraternity brother of PTE’s general counsel Cameron Hoyler and PTE’s
COO Ned Swanson at Penn.

2.f. John O’Rourke

O’Rourke is a defendant in ​SEC v Honig​. O’Rourke is the former CEO at Riot
Blockchain (RIOT).

2.g. Mark Groussman

Groussman was a defendant in ​SEC v Honig​ until he settled with the SEC.

2.h. Steve Rubin

Rubin is an officer at OPK, and a director at a number of Frost gang companies.

2.i. Jane Hsaio

Hsaio is an officer at OPK, and a director at a number of Frost gang companies.

https://www.teribuhl.com/2016/05/26/microcap-attorney-jaclins-co-conspirator-turned-doj-witness-in-shell-
factory-scheme/​ (Teri Buhl article)

http://www.teribuhl.com/2019/09/04/andy-defrancesco-quits-sol-global-top-job-after-bad-press-weighs-on-
stock-price-sol-cn-solcf/​ (Teri Buhl article)
9

http://www.teribuhl.com/2019/09/25/barry-honig-secretly-funded-underwriting-in-his-laidlaw-co-deals-trpx/
(Teri Buhl article)

4
2.j. Richard Pfenniger
Pfenniger is a director at OPK, TRXC and the Frost Museum of Science.

2.k. Richard Lampen

Lampen is the chairman at LTS.

2.l. James J.Marten

Martinis a Frost gang factotum. Martin’s biography says,”​Mr. Martin has extensive
public company experience as a CFO. From 2014 to 2016 Mr. Martin was the Chief Financial
Officer of VBI Vaccines, Inc. (formerly SciVac Therapeutics, Inc.), a dual listed Canadian TSX
and NASDAQ commercial vaccine company, where he navigated the company in the successful
completion of a merger in July 2015 and an acquisition in May 2016. Since 2010, Mr. Martin has
also served as the Chief Financial Officer of Non-Invasive Monitoring Systems, Inc., an OTC
listed non-invasive medical devices company. From 2014 to 2015, Mr. Martin served as Chief
Financial Officer of the NASDAQ listed Vapor Corp, Inc. after serving as Chief Financial
Officer of NYSE listed TransEnterix, Inc. from 2010 to 2013. Earlier in his career, Mr. Martin
held finance positions at Aero Pharmaceuticals, AAR Aircraft Services and Systems Products
International. Mr. Martin was also an Operations Specialist with the U.S. Navy from 1985 to
1990. Mr. Martin holds an undergraduate degree in business administration and an MBA from
Barry University in Miami and is a Certified Public Accountant.”10

2.m. Adam Logal

Logal is the CFO at OPK.

3. Frost gang companies

3.a. BioZone (BZNE)/CoCrystal Pharma, Inc. (COCP)
Before BioZone came into contact with the Frost gang, BioZone had a $15 million
manufacturing business, over a hundred employees, a proprietary drug delivery technology
platform, a patent portfolio of over 100 applications and patents in over 80 countries, and a rich
pipeline of potential pharmaceutical, OTC and nutraceutical products. The Frost gang destroyed
BZNE’s business and R&D program in order to conduct their P&D securities fraud.
BZNE/COCP is the first Frost gang P&D described in ​SEC v Honig​. However, according
to my calculations (which I have shared with the Feds), the allegations in ​SEC v Honig​ account
for only a fraction of the illegal profits the Frost gang made from the BZNE/COCP P&D. Frost,

10

https://www.cocrystalpharma.com/news/press-releases/detail/36/james-j-martin-appointed-as-chief-financ
ial-officer-of

5
Rubin and Hsaio are still on the COCP BOD. COCP’s CFO, James Martin, has spent much of
his career at a succession of Frost gang companies.
The market cap of COCP is about $23 million, down from a peak of over a billion
dollars. The last few days have seen a huge spike in trading volume. On October 31, 2019,
COCP filed a prospectus to sell more stock.

3.b. PolarityTE (PTE)

PTE "doctors" used SkinTE, a product with no proof of safety or efficacy, on badly
burned children as part of their stock promotion. The SkinTE treatments failed. Fortunately, the
children survived.
PTE has disclosed that it has received a subpoena from the SEC.
PTE used to be Majesco (COOL).
COOL/PTE founder Denver Lough has been removed as CEO by the BOD, and Lough
has resigned from the board. PTE has filed a registration statement that would allow Lough to
sell 7 million shares of his PTE stock.

3.c. Opko Health, Inc. (OPK)

Frost is the CEO, chairman, and largest shareholder at OPK. A glance at Opko’s public
SEC filings reveals a company in crisis:
-- Negative operating capital.
-- Negative net asset value when excluding intangible assets.
-- Opk losing $50 million per quarter.
-- No real prospect of increasing revenues significantly.
-- Multiple lawsuits.
-- Denial of insurance coverage for class action and derivative suits.
-- False Claims Act (Medicare fraud) allegations by the SDNY.
-- Allegations of illegal physician subsidies by the SDNY.
OPK’s share price is down from over 18 bucks a share to about a buck-fifty. About $8
billion of market cap has disappeared. OPK has entered into an underwriting agreement to sell
more stock.

3.d. Red Violet (RDVT)

RDVT is bucking the trend of Frost gang companies by maintaining its share price, even
though RDVT’s financial disclosures in its SEC filings would not seem to support the current
valuation. I wrote to the SEC and DOJ on October 11, 2019 with my observations and
speculations about RDVT. This October 11 letter is not public at the moment.

3.e. Ladenburg Thalmann (LTS)

Frost is the former chairman at LTS.

6
3.f. MabVax (MBVX)
MBVXis one of the companies described in ​SEC v Honig​ as the subject of a Frost gang
P&D. MBVX is in bankruptcy proceedings. MBVX is suing Kesner.

3.g. Towerstream (TWER)

Frost was an investor with Honig in TWER. TWER has a current market cap of about
$79 thousand, down from a peak of about $10 million.11

3.h. Transenterix (TRXC)

TRXC, formerly SafeStitch Medical, has a current market cap of about $52 million, down
from over $1 billion. Jane Hsaio and Richard Pfenniger are directors. Frost was an investor in
Safestitch, and helped the company raise money in a merger..

3.i. Cool Holdings (AWSM)

AWSM has disclosed that it has received a subpoena from the SEC. AWSM shares are
trading for about 26 cents, down from over 10 dollars in September of 2018.

3.j. Therapix (TRPX)

http://www.teribuhl.com/2019/09/25/barry-honig-secretly-funded-underwriting-in-his-laidlaw-co
-deals-trpx/​ (September 25, 2019 article by Teri Buhl)

3.k. (RIOT)

3.l. (ATNM)

3.m. (ELOX)

3.n. Spherix (SPEX)

3.o. Relmada (RLMD)

3.p. (MSLP)

3.q. (FLNT)

11

https://insiderfinancial.com/towerstream-corporation-nasdaqtwer-is-playing-out-exactly-how-honig-expect
ed/117783/

7
3.r. (NIMU)

3.s. (NVCN)

3.t. (PHIO)

3.u. (USAU)

3.v. (VBIX)

3.w. (XBIO)

3.x. Chanticleer (HOTR/BURG)

3.y. Chromadex (CDXC)

3.z. (DCAR)

3.aa. (VPCO/HCMC)

3.bb. (HCYT)

3.cc. (MARA)

3.dd. (MGTI)

4. Civil litigation
4.a. ​SEC v Honig
https://www.sec.gov/litigation/litreleases/2018/lr24262.htm​ (SEC press release)
https://www.sec.gov/litigation/complaints/2018/comp24262.pdf​ (original complaint)
https://www.sec.gov/litigation/complaints/2019/comp24431.pdf​ (amended complaint)
The following defendants have reached complete settlements with the SEC: Frost/FGIT
(Frost Gamma Investment Trust) paid about $5.4 million. OPK paid $100 thousand. Alpha
Capital Anstalt paid about $957 thousand. Mark Groussman/Melechdavid paid about $1.38
million.
The following defendants have reached partial settlements with the SEC, with the amount
to be paid as yet undetermined: John Ford, Brian Keller, Elliot Maza, Barry Honig/GRQ
Consultants.

8
 The following defendants are in discovery and preparing for trial: Michael
Brauser/Grander Holdings, John Stetson/Stetson Capital Investments/HS Contrarian
Investments, Robert Ladd, and John O’Rourke/ATG Capital.
The SEC recently disclosed that they have collected over 4 million documents in the
preparation of their case.
https://www.scribd.com/document/432570438/SEC-Subpoena-List-in-Barry-Honig-Investigation
-10-28-19​ (SEC’s document list)

4.b. ​Pederson v Frost

Pederson v Frost I (​ pvf1) is currently on appeal at the 8th Circuit Court of Appeals.
Pederson v Frost II​ (pvf2) has been stayed pending the appeal of pvf1.
https://www.scribd.com/document/374185521/Pederson-v-Frost-amended-complaint-filed-Febru
ary-14-2018​ (pvf1 amended complaint)
https://www.courtlistener.com/recap/gov.uscourts.mnd.181288/gov.uscourts.mnd.181288.1.0.pdf
(pvf2 complaint)

4.c. ​Kesner v Barron’s, Bill Alpert and Teri Buhl

https://www.scribd.com/document/419796626/Kesner-v-Barron-s-Bill-Alpert-and-Teri-Buhl-FL
SD-2019​ (complaint)
https://www.scribd.com/document/426383625/September-18-2019-Pederson-Letter-to-Feds-Re-
Harvey-Kesner​ (my commentary on ​Kesner v Barron’s)​

4.d. ​Moreno v PolarityTE​ (class action)

https://www.courtlistener.com/docket/7323708/moreno-v-polarityte/?filed_after=&filed_before=
&entry_gte=&entry_lte=&order_by=desc​ ​ (docket)

5. Ongoing SEC investigations of Frost gang companies and members

6. Ongoing DOJ criminal investigations of Frost gang companies and members

https://www.teribuhl.com/2017/02/09/california-doj-investigating-honig-and-the-frost-group-2/
(November 8, 2016 article by Teri Buhl)
http://www.teribuhl.com/2019/03/19/honigs-broker-dealer-laidlaw-target-of-fbi-investigation/
(March 19, 2019 Teri Buhl article)

7. Frost gang market manipulation

7.a. Illegal swap trades
Both the complaint and amended complaint in ​SEC v Honig​ describe in detail how the
Frost gang used illegal swap trades during the BZNE P&D securities fraud.

9
7.b. Undisclosed paid pumping
John Ford has consented to judgment in ​SEC v Honig​.
Chris Carey has written a long and detailed article describing a network of writers who
illegally promote Frost gang companies.12
The Frost gang appears to use paid pumpers on internet message boards.

7.c. Broker/dealer activities

Teri Buhl has written a series of articles describing how the Frost gang uses Laidlaw &
Company to sell shares of Frost gang companies to retail investors.
https://www.teribuhl.com/2018/09/12/laidlaw-execs-helped-barry-honig-execute-stock-manipula
tion-scheme/​ (Teri Buhl article)

7.d. Other market manipulation

8. SEC complicity in Frost gtang frauds

This report is posted online at Scribd, with a link from Twitter

Lee Pederson

To:
SEC OIG

Cc:
Minnie Baylor-Henry, Director at PTE (℅ Maggie Dalton)
Phillip Frost (℅ Attorney Joe Dixon)

Bcc:
SEC and DOJ agents (FBI and US Attorney’s Office)
Journalists and business writers
Other interested persons

12

http://sharesleuth.com/investigations/2018/03/pretenders-and-ghosts-stealth-promotion-network-exploits-f
inancial-sites-to-tout-stocks​ (Chris Carey article)

10