SEC Obtains Partial Summary Judgment Against Microcap Issuer and Its CEO
Litigation Release No. 25510 / September 16, 2022
Securities and Exchange Commission v. Nutra Pharma Corp. et al, No. 1:18-cv-5459 (E.D.N.Y filed September 28, 2018)
On August 31, 2022, the U.S. District Court for the Eastern District of New York granted the Commission summary judgment on four of its claims.
According to the SEC's complaint, Nutra Pharma Corporation, a microcap issuer that purports to make pain relief drugs with cobra venom, and its CEO, Rik Deitsch, issued or posted a series of press releases that materially misled investors. The releases allegedly implied, among other things, that Nutra Pharma had taken purported steps to distribute Nyloxin internationally, when it had not, and that Nutra Pharma had expanded and upgraded its cobra farm facilities, when it did not own those facilities or its cobras and there were no expansions or upgrades. Nutra Pharma publicized many of these press releases while Nutra Pharma and Deitsch allegedly engaged in an unregistered distribution of its securities to retail investors. In addition, on multiple occasions, Deitsch allegedly engaged in manipulative trading to try to stabilize or raise Nutra Pharma's stock price and to create the appearance of active trading. Further, Nutra Pharma and Deitsch allegedly failed to make numerous required filings, including ones about the company's sales of unregistered securities and ones about Deitsch's beneficial ownership of the company's securities.
The Commission moved for summary judgment on its non-fraud claims against Nutra Pharma and Deitsch. The Court found Nutra Pharma and Deitsch violated Sections 5(a) and (c) of the Securities Act of 1933 through their unregistered offering of securities; that Nutra Pharma violated Section 13(a) of the Exchange Act of 1934 ("Exchange Act") and Rule 13a-11 thereunder for failing to file required Forms 8-K related to stock issuances; and that Deitsch violated Exchange Act Sections 13(d)(1) and 16(a) and Rules 13d-2(a) and 16a-3 thereunder by failing to make required filings about his beneficial ownership. The Court denied the Commission's motion as to its claim that Deitsch aided and abetted Nutra Pharma's failure to file these required Forms 8-K, leaving that claim along with the Commission's fraud claims for resolution at trial.
The ongoing litigation is led by Lee A. Greenwood, Preethi Krishnamurthy, and Lindsay Moilanen, and the case is being supervised by Sheldon L. Pollock.