Phillip Frost’s Legal Quagmire

January 6, 2020

To:
SEC and DOJ (FBI and US Attorneys) agents - by bcc
SEC OIG

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

bcc:
journalists and business writers
other interested parties

RE: Litigation and Investigations relating to Phillip Frost

All,

Billionaire Phillip Frost is the head of a white collar gang that specializes in market
manipulation and securities fraud, especially pump and dump (P&D) securities frauds. The Frost
gang (Frost, Barry Honig, Harvey Kesner, Michael Brauser, John Stetson, John O’Rourke, Mark
Groussman, and many others) have committed frauds at many public companies. These frauds
have resulted in a wide range of civil litigation, federal investigations, federal enforcement
actions, and media reports.
23 categories of Frost and Frost gang-related civil litigation, federal investigations and
federal enforcement actions are outlined below. While Frost himself is not directly implicated in
all the activities described, the actions of Frost’s accomplices, agents, and co-conspirators often
shed light on Frost’s own motives and methods. In many of the categories, Frost has clear
responsibility, civil liability, and criminal culpability for the illegal actions described.
I have previously prepared a report on the Frost gang outlining some of the members and
associates of the Frost gang and some of the companies where the Frost gang has conducted their
frauds (“Frost gang Report).1 Like that report, this present summary of Frost gang investigations
and legal actions is not comprehensive, complete, up-to-date, or fully referenced. However, it is
my hope that it will still be useful for those who are interested in exploring and understanding
the nature and scope of the illegal activities of Phillip Frost and his gang.

1
​https://www.scribd.com/document/433227623/191103-Frost-Gang-Report

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 Frost’s stature has fallen considerably since Dan Fisher filed the first litigation exposing
the Frost gang in 2012. When I began collaborating with Fisher in 2014, Dan’s words were
prophetic. Dan said that it would take a three-prong strategy to completely expose Frost and his
gang. Fisher’s own lawsuit was the initial lawsuit of the first prong of civil litigation. The
second prong was federal investigation and enforcement, and Dan and I were the primary
catalysts in the process that eventually led to the filing of​ SEC v Honig et al ​on September 7,
2018. The third prong was media coverage. Such media coverage was extremely hard to come
by in the beginning, but that has started to change.
Frost and his henchmen built an organization that has been difficult to bring down. Their
primary bulwark has been Frost’s vast wealth and his reputation as a successful businessman and
philanthropist. For both Dan Fisher and myself, Frost was able to deceive us long past the point
where we would ordinarily have known that we were being lied to. It simply did not make any
sense to either of us that someone in Frost’s position would be leading a fraudulent and criminal
organization. Other strong points of the Frost gang were: their ability to co-opt individuals into
their frauds with the promise of financial rewards,2 their strategy of silencing critics and reporters
with litigation and the threat of litigation, Frost’s ability to control ownership and management
of public companies, Frost’s ability to financially bail out companies when frauds began to
unravel3and Frost’s ability to dictate publicity and press coverage.
Tattered remnants of the Frost gang’s strength linger on, such as in the first paragraph of
Frost v LTS​, where Frost pathetically pleads that he is more than just a run-of-the mill liar,
fraudster and criminal:

2
For example, Brian Keller associated himself with the Frost gang in the BioZone P&D.
3
As examples, Frost bailed out IDI with $47 million to merge with Fluent, and Frost has kept COCP
solvent with a series of private placements.

2
 Of course, Frost still has the money and ability to direct armies of lawyers, though now
he is sometimes forced to pay the lawyers himself rather than use the corporate treasuries of
companies he controls.4 Similarly, Frost is still able to manipulate the media by paying public
relations / crisis management “fixers” like Sard Verbinnen, though the days of Frost getting free
and favorable media coverage in publications like ​ Forbes​ are long gone.
Until recently, Frost has tried to stay in the background of Frost gang litigation, but that is
changing, too. The walls are closing in on him, and he is scurrying to try to gain what leverage
he can by actions such as the filing of ​Frost v LTS​. By becoming a plaintiff, he has opened
himself to a deposition which could hasten his trip to the federal penitentiary. He has also
introduced new avenues of investigation for the Feds and others, such as by disclosing an
apparent FINRA investigation of LTS in the following allegations:

Many layers of the Frost gang’s P&D frauds have been peeled away over the last couple
years, and more layers are revealed almost every week by civil litigation, federal investigations
and enforcement, and media coverage. It is only a matter of time before the collapse of the Frost
gang is complete.

4
On October 25, 2019, OPK filed a prospectus with the SEC. Page S-31 of that prospectus that stated
“​Our primary and side A directors and officers’ liability insurance carrier has denied coverage
for the class action and derivative suits filed against us and our directors and officers concerning
the allegations in the Complaint.”

3
 Frost gang Litigation and Investigations

1- Dan Fisher litigation: ​ Fisher v BioZone​ and “Garcia Properties litigation”

Fisher’s two lawsuits against the Frost gang are described in the complaints for ​Pederson
v Frost I​ (pvf1) and ​Pederson v Frost II (​ pvf2) among many other places.

2- ​Pederson v Frost I​ (pvf1) and ​Pederson v Frost II ​(pvf2)

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)
These lawsuits will continue for some time, though the exact legal procedures are
unknown right now. Among the possible procedural options are trial in Minnesota Federal
District Court, appealing the issue of jurisdiction to the U.S. Supreme Court, and refiling pvf2 in
Florida Federal District Court.

3- ​SEC v Honig
SEC v Honig i​ s the first major enforcement action by the Feds against the Frost gang.
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 in this case:
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.
The following defendants are preparing for trial: Michael Brauser/Grander Holdings,
John Stetson/Stetson Capital Investments/HS Contrarian Investments, Robert Ladd, and John
O’Rourke/ATG Capital.

4- OPK litigation
A- ​Steinberg v Opko​ (FLSD 1:19-cv-20502-JEM​) ​This Opko class action lawsuit has
been consolidated from numerous initial complaints. Frost is named as a defendant.The
120-page consolidated class action complaint was filed May 3, 2019 and can be seen at:
http://securities.stanford.edu/filings-documents/1067/OHI200_02/201953_r01c_18CV23786.pdf

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 B- Plaintiff Connie Wendt has sued Frost for frauds at OPKO, RIOT, VBIV and PTE. I
have not been tracking this litigation. A January 4, 2019 Miami New Times article about
Wendt’s case can be seen at:
https://www.miaminewtimes.com/news/miami-billionaire-phillip-frost-sued-for-additonal-stock-
fraud-10971262

5- BioZone/COCP litigation
A- ​Pepe v CoCrystal​ (DNJ 2:18-cv-14091-KM-JBC). This CoCrystal class action
lawsuit has been consolidated from numerous initial complaints. Frost is named as a defendant.
The 68-page amended class action complaint was filed June 25, 2019 and can be seen at:
http://securities.stanford.edu/filings-documents/1067/CPI200_02/2019625_r01c_18CV14091.pd
f
B- ​Tutschek v. Schinazi et al​ (WDWA 2:2019cv01775) A 51-page complaint was filed
on Nov 1, 2019. Frost is named as a defendant.

6- PTE class action

In Re PolarityTE Inc. Securities Litigation​ (DUT 2:18-cv-00510-JNP-PMW) This PTE
class action lawsuit has been consolidated from numerous initial complaints. Frost is not named
as a defendant. The 80-page amended class action complaint was filed April 2, 2019 and can be
seen at:
http://securities.stanford.edu/filings-documents/1066/P00_01/201942_r01c_18CV00510.pdf
Though Frost was not named as a defendant in this lawsuit, Frost played a major role in
the COOL/PTE P&D securities fraud, as documented in a variety of public news stories. Chris
Carey (aka Sharesleuth) has reported that Frost sold $6 million of COOL/PTE stock in 2017:
http://sharesleuth.com/investigations/2018/07/cool-mara-riot-the-big-money-bitcoin-biotech-dais
y-chain

7- SEC investigation at PTE

PTE has disclosed in its public SEC filings that the company has received multiple
subpoenas from the SEC.

8- SEC investigations at AWSM and RIOT

AWSM and RIOT have disclosed that they have received subpoenas from the SEC.

9- Laidlaw & Co.investigation

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. Buhl’s article of March 19,
2019 reports that Laidlaw in under investigation by the FBI.

5
https://www.teribuhl.com/2018/09/12/laidlaw-execs-helped-barry-honig-execute-stock-manipula
tion-scheme/
http://www.teribuhl.com/2019/03/19/honigs-broker-dealer-laidlaw-target-of-fbi-investigation/
https://www.teribuhl.com/2019/08/02/laidlaw-assisted-barry-honig-in-secret-stock-sales-pre-pd-
of-u-s-gold-usau/

10- Other Frost gang P&D companies

As outlined in my Frost gang Report, the Frost gang has conducted frauds at many
companies. Names of companies names where securities fraud is suspected have appeared in
court filings in ​SEC v Honig.​ Such names include BioZone, MusclePharm, Ladenburg, Passport
Potash, Pyramid Oil, Pershing Gold, Silver Mining Ltd, IZEA, and Senesco Technologies. Other
Frost gang companies that are obvious targets to investigate include BURG, DCAR, XBIO,
USAU, TWER, VPCO/HCMC, TRXC, TEUM, SPEX, RDVT, PXHI, PHIO, NVCN, MARA,
and HCYT.

11- OPK investigations

OPK is under investigation by the DOJ for improper Medicare billing under the False
Claims Act.
https://hindenburgresearch.com/opko-health-if-these-sec-charges-were-surprising-then-you-have
nt-been-paying-attention/

12- Other Frost investigations

A- I have filed a whistleblower complaint against LTS for possible securities frauds.
B- I have urged the SEC to investigate Frost for possible illegal short-selling of OPK
shares on the Tel Aviv Stock Exchange.5

13- ​Winfield v ELOX

https://www.teribuhl.com/2019/03/18/honig-eloxx-pharma-sued-for-stock-fraud-elox/
Teri Buhl has written about this case, which was filed on March 14, 2019. Frost is not
named as a defendant, though Frost was and is involved in ELOX and related companies.

14- Frost gang lawsuits to silence journalists and critics

A- ​Hoing v Drose
In this case, Honig successfully sued Chris Drose (aka Bleecker Street Research) to
retract negative stories on Frost gang companies Chromadex and Pershing Gold.
B- ​Honig v Buhl I ​and ​Honig v Buhl II

5
​https://www.scribd.com/document/429644254/191010-Frost-as-an-OPK-Short-Seller-Hypothesis

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 In these two cases, Honig unsuccessfully sued Teri Buhl to silence her reporting on
MGTI, which is “Company B” in ​SEC v Honig.​
C- ​Vuzix v Richard Pearson​ (SDNY 1:19-cv-00689-NRB)

15- ​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)
This lawsuit against two journalists smacks of desperation by attorney Harvey Kesner
and the Frost gang. The articles that Kesner complains about are highly unfavorable to Frost,
Kesner, and the Frost gang, but they are well-researched, well-written and accurate.6 7 If there is
some strategic motive behind Kesner’s bogus and sure-to-fail legal action, I do not see it. My
commentary on this case can be seen at:
https://www.scribd.com/document/426383625/September-18-2019-Pederson-Letter-to-Feds-Re-
Harvey-Kesner

16- Defamation lawsuits against Pederson

The remarkable thing about this category is that no Frost gang individual or entity has
sued me for defamation, even though I have been outspoken about the frauds and crimes of the
Frost gang.
A- Over eight months ago, PTE threatened to sue me for contacting PTE director
Minnie Baylor-Henry regarding the P&D securities fraud at COOL/PTE:
https://www.scribd.com/document/407800853/190426-Letter-From-PTE-s-Legal-Counsel-to-Le
e-Pederson
I responded to this threat by posting PTE’s cease-and-desist letter on Twitter and
continuing to provide information to Ms. Baylor-Henry. As a result, PTE has not sued me, and
the PTE Board of Directors subsequently removed Denver Lough from his position as CEO, and
then removed Lough from his position on the BOD.
B- After Harvey Kesner filed ​Kesner v Barron’s,​ I invited Kesner to sue me:

6
​https://www.barrons.com/articles/sec-charges-phillip-frost-1536608366
7
​https://www.barrons.com/articles/the-lawyer-at-the-center-of-sec-pump-and-dump-case-1538675403

7
 Kesner has not sued me.
C- I have frequently called Phillip Frost a fraudster and criminal on Twitter and in other
contexts. I use the hashtags #PrisonTimeforWhiteCollarCrime and #BernieMadoffofBiotech to
refer to Frost. Frost has not sued me.

17- YesDTC litigation

Teri Buhl has reported extensively on this case that clearly implicates Barry Honig in an
early P&D operation that resulted in criminal convictions and civil judgments.

18- TEVA investigations and litigation

A- TEVA Pharmaceuticals settled with the US government for Foreign Corrupt Practices
Act (FCPA) violations that largely occurred when Frost was Chairman at TEVA. The DOJ press
release about the $519 million settlement can be seen at:
https://www.justice.gov/opa/pr/teva-pharmaceutical-industries-ltd-agrees-pay-more-283-million-
resolve-foreign-corrupt
More information about the settlement and other shady dealings at TEVA when Frost was
Chairman can be seen at:
https://www.fiercepharma.com/pharma/former-teva-execs-board-members-to-pay-50m-for-role-
2016-foreign-bribery-case
B- TEVA has also settled false Claims Act (FCA) claims for fraudulent Medicaid billing
that occurred while Frost was Chairman.

19- MabVax litigation

A- ​MabVax v Honig et al​ (Superior Court of California, San Diego County, Case No.
37-2019-00018398) This case was filed on April 8, 2019 and alleges claims for unlawful market
manipulation, fraud, etc.

8
 B- ​Mabvax v Sichenzia​. The original 39-page complaint against Harvey Kesner and his
former law firm can be seen here.
https://www.scribd.com/document/392545187/Mabvax-v-Sichenzia
The docket can be seen here:
https://www.courtlistener.com/docket/8138204/mabvax-therapeutics-holdings-inc-v-sichenzia-ro
ss-ference-llp/?filed_after=&filed_before=&entry_gte=&entry_lte=&order_by=desc

20- DOJ criminal investigations

I know from personal experience, correspondence, and documentation that specific
agents (FBI and US Attorneys) in the Department of Justice have been investigating members of
the Frost gang since at least 2014.
Teri Buhl was the first to write about the DOJ investigation on November 8, 2016:
https://www.teribuhl.com/2017/02/09/california-doj-investigating-honig-and-the-frost-group-2/
Buhl reported on another aspect of the DOJ investigation on March 19, 2019.
http://www.teribuhl.com/2019/03/19/honigs-broker-dealer-laidlaw-target-of-fbi-investigation/
Buhl also reported that SEC attorney Nancy Brown publicly confirmed the existence of
the DOJ investigation during a May 15, 2019 hearing in the case of ​SEC v Honig.​
https://www.teribuhl.com/2019/05/22/sec-admits-team-honig-is-under-the-criminal-investigation
-i-warned-about-in-2016/

21- LTS litigation

Phillip Frost resigned as chairmain of LTS shortly after ​SEC v Honig​ was filed in
September of 2018, and then sold most of his LTS holdings to LTS after Frost settled with the
SEC in early 2019. In November of 2019, LTS announced that it would be acquired by Advisor
Group.8 Frost sued LTS shortly thereafter (December 2019). Five other lawsuits have also been
filed against LTS.
It appears to me that Frost’s primary motive for filing ​Frost v LTS​ is to shield his past
frauds at LTS from discovery and liability. The complaint, which was filed on December 20,
2019, can be found by searching at the following link:
https://www2.miami-dadeclerk.com/ocs/Search.aspx

22- SEC OIG investigation

In December of 2013, I filed an SEC whistleblower complaint about the P&D securities
fraud at BioZone. I followed up by providing the office of the whistleblower with voluminous
information about the fraud. In about July of 2015, Whistleblower Chief Sean McKessy called
me personally to tell me that his office would not take any action in regards to my complaint.

8
https://www.streetinsider.com/Corporate+News/Advisor+Group+and+Ladenburg+Thalmann+%28LTS%2
9+Announce+Merger+%28Earlier%29/16118119.html

9
The SEC later began a separate investigation of the Frost gang because of new contacts between
the agency, Dan Fisher and myself, and eventually ​SEC v Honig​ was filed on September 7, 2018.
I have asked that the SEC Office of the Inspector General to investigate the
circumstances, communications, and deliberations that resulted in the McKessy phone call to me.
I have subsequently expanded my request and by asking that the SEC OIG investigate other SEC
actions and inactions related to the Frost gang.

23- ​Pederson v Clayton

There are many honest and hard-working employees within the SEC. However, I believe
that in some instances individuals within the SEC have acted corruptly regarding the lack of
enforcement actions against the Frost gang. In other instances, I believe that individuals within
the SEC have acted corruptly or arbitrarily and capriciously regarding matters involving the
Frost gang. I have written an open letter to SEC Chairman Jay Clayton expressing these
concerns. My letter to Clayton can be seen at:
https://www.scribd.com/document/433709218/191106-Open-Letter-to-Jay-Clayton
I expect that the SEC will not address my concerns in a meaningful way. Therefore, at an
appropriate time and after framing the issues with Freedom of Information Act (FOIA) requests,
I intend to bring a lawsuit against Chairman Clayton to discover what has been going on inside
the SEC with respect to Phillip Frost and his gang.

Summary and Conclusion

None of the 23 categories of litigation and investigations outlined above have been
resolved completely. In fact, we are still at a stage where new information is rapidly being
developed through several channels, including discovery in litigation, federal investigations,
media reports, and corporate SEC disclosures. Since the Frost gang companies were designed as
vehicles for P&D securities frauds and not to be profitable operating companies, the financial
condition and share price of the companies generally decline over time. As time goes by, the
truth behind the frauds and crimes of Phillip Frost and the Frost gang will inevitably be revealed.

This letter is posted on ScribD with a link from Twitter.

Signed,
Lee Pederson

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