SEC v. Biochemics, Inc., et al. Case Number: 12-cv-12324 (D. Mass)
Aug. 29, 2022
On December 14, 2012 the Commission filed a complaint against BioChemics, Inc. (“BioChemics”), John J. Masiz (“Masiz”), Craig Medoff (“Medoff”) and Gregory S. Kroning (“Kroning”) (collectively, “Defendants”). The complaint alleged that from 2009 until mid-2012, Defendants raised at least $9,000,000 from approximately 70 investors by misrepresenting that BioChemics was engaged in active research and development collaborations with major pharmaceutical companies, that it had two drugs under FDA review, and that it was conducting specific clinical trials—all of which was false. According to the complaint, when BioChemics finally did conduct one clinical trial, it misrepresented the results of that trial. The complaint further alleged that Masiz and Medoff created and gave to investors fraudulent valuations setting the worth of BioChemics at between $500 million and $2 billion. However, according to the complaint, the valuations had no reasonable basis and the defendants’ representations that the valuations had been developed by reputable independent investment banks were false. In addition, the complaint alleged that Defendants misrepresented Masiz's background and use of investor proceeds--for example, they failed to disclose to investors that Masiz was the subject of a prior Commission securities fraud action that resulted in a final judgment against him in 2004, and that BioChemics' investor funds were used to pay for Kroning and Masiz's personal expenses. See Complaint.
In total, the Defendants were ordered to pay $18,132,254.20 in disgorgement, prejudgment interest, and civil penalties. See BioChemics’ Supplemental Judgment, Medoff’s Final Judgment, and Masiz’s Final Judgment. The Court has dismissed all charges against Kroning, who is now deceased.
On October 9, 2018, the Court appointed a Receiver, Mark G. DeGiacomo, for BioChemics and its related party, the Shareholder Resolution Trust. The Receiver assumed control over all property of BioChemics as well as property of Shareholder Resolution Trust in which the Commission has first-priority security interests. See Order Appointing Receiver.
The Receiver completed the liquidation of the assets of BioChemics and Shareholder Resolution Trust, in the amount of $76,153.69 (“Liquidation Proceeds”).
On January 06, 2021, the Court entered an Order allowing the Commission to establish a Fair Fund and direct the transfer of $906,183.91 in received funds and interest to the Receiver for distribution to eligible investors (the “Fair Fund”). See Order Establishing Fair Fund.
The sum of the Liquidation Proceeds and the Fair Fund constitutes the distribution (the “Distribution Fund”).
On February 22, 2021 the Receiver filed a motion to approve the distribution plan (the “Plan”), which provides for the Receiver to distribute the Distribution Fund to the Administrative Creditors (as defined therein) and the 120 Series E investors who were harmed by the underlying conduct as determined by the Court in this action (the “Eligible Investors”). See Receiver’s Motion with the Plan.
The Plan further provided that any persons wishing to comment or object to the Plan must do so in writing within 21 days, or March 15, 2021. No comments were received and on March 24, 2021 the Court entered an order approving the Plan and allowing the Receiver to distribute the Distribution Fund to Eligible Investors. See the Court’s Order.
For more information, please contact the Receiver:
Mark G. DeGiacomo, Receiver
Telephone: 617-451-4000 Email: firstname.lastname@example.org