U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23891 / July 31, 2017
SEC v. Stephen D. Ferrone, et al., No. 1:11-cv-05223 (N.D. Ill.)
FINAL JUDGMENTS ENTERED AGAINST BIOPHARMACEUTICAL COMPANY CEO AFTER JURY VERDICT
The Securities and Exchange Commission announced that on July 28, 2017, an Illinois federal court entered a final judgment against Defendant Stephen Ferrone following an April 2016 jury verdict in the Commission's favor. The final judgment prohibits Ferrone, retroactively to July 24, 2016, from serving as an officer or director of a public company for a period of three (3) years. The final judgment also requires Ferrone to pay a $120,000 civil penalty.
The Commission charged Ferrone and other defendants in August 2011, alleging, among other things, that Ferrone made materially false and misleading statements during 2007-2010 regarding the status of regulatory approvals for Immunosyn's sole product, a drug referred to as "SF-1019." The Commission's complaint alleged that Ferrone falsely stated in public filings with the Commission and in other presentations that Argyll Biotechnologies, LLC, Immunosyn's controlling shareholder, planned to commence the regulatory approval process for human clinical trials for SF-1019 in the U.S. or that the regulatory approval process was underway. The complaint alleged that these statements deceived investors because the statements failed to disclose that the U.S. Food and Drug Administration had issued clinical holds on drug applications for SF-1019, which prohibited clinical trials involving SF-1019 from occurring.
After a two-week trial in April 2016, the jury found Ferrone liable for violating Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 thereunder, and Exchange Act Rule 13a-14. The jury found Ferrone not liable for aiding and abetting Immunosyn's failure to file annual, quarterly, and current reports that were accurate and not materially misleading under Exchange Act Section 20.