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SEC Charges Seattle Attorney and Accomplices with Orchestrating Stock Dumping Scheme


Washington, D.C., July 13, 2009 — The Securities and Exchange Commission today charged Seattle-based securities lawyer David Otto and several others with conducting a fraudulent “pump-and-dump” scheme in which they secretly unloaded more than $1 million in penny stock of a company touting non-existent anti-aging products.

The SEC alleges that a series of misleading press releases and Web profiles were used to tout purported beverages and nutritional supplements of Seattle-based MitoPharm Corporation. With claims that its products had anti-aging benefits from an ingredient extracted from a berry used in traditional Chinese medicine, MitoPharm’s stock price more than quadrupled during the aggressive stock promotion campaign. However, the SEC alleges that MitoPharm’s products were not “available” as advertised and were still in the developmental stage. Full-color photos featuring beverage cans and pill bottles were only mock-ups of non-existent products.

“Attorneys are supposed to function as gatekeepers in the securities industry,” said Marc J. Fagel, Director of the SEC’s San Francisco Regional Office. “Otto and his firm used phony documents to corner the market in a start-up company’s stock, and then profited at the expense of unsuspecting investors when the stock-promoting campaign caused the share price to briefly skyrocket before plummeting back down to earth.”

The SEC’s complaint, filed in federal court in Seattle, charges Otto, his associate Todd Van Siclen of Seattle, and Houston-based stock promoter Charles Bingham and his company Wall Street PR, Inc. MitoPharm and its CEO Pak Peter Cheung of Vancouver were also charged.

According to the SEC’s complaint, the scheme began in late 2006 when Otto, who was hired by Cheung, arranged to purchase a publicly traded shell company as a merger partner for MitoPharm. Otto and Van Siclen drafted opinion letters to MitoPharm’s transfer agent filled with false statements in order to secure supposedly “freely tradable” stock certificates for individuals and entities secretly controlled by Otto.

The SEC’s complaint alleges that Cheung hired Bingham on Otto’s recommendation, and they embarked on an aggressive public relations campaign that centered on the misleading promotion of two key products — “Restorade” and “Stamina Solutions” — that did not exist. They developed promotional materials that falsely stated that both Restorade and Stamina Solution were “[a]vailable as functional beverage or as a soft gel capsule.”

According to the SEC’s complaint, Cheung had a graphics artist create renderings of what the containers for MitoPharm’s products could look like in order to accompany the written text of MitoPharm’s Web site and other promotional materials. Written materials and Web profiles created by Bingham and others were disseminated to investors with the fake images and present-tense descriptions of the products.

The SEC further alleges that as the promotional campaign caused the stock price to rise above $2.30, Otto sold his shares for more than $1 million and Bingham netted an additional $300,000. The massive selling of the stock caused the price to fall to a nickel per share by November 2007.

The SEC’s complaint alleges that the defendants violated the antifraud and other provisions of the federal securities laws. The SEC seeks injunctive relief, disgorgement and financial penalties from the defendants as well as penny stock bars for Otto, Van Siclen, and Cheung, and an officer-and-director bar against Cheung.

The SEC acknowledges the assistance of the Financial Industry Regulatory Authority.

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For more information, contact:

Sheila E. O’Callaghan
Branch Chief, SEC’s San Francisco Regional Office
(415) 705-2459



Modified: 07/13/2009