The Securities and Exchange Commission (“SEC”) charged David Blech and his wife with running a complex market manipulation scheme involving biopharmaceutical stocks.  According to the SEC, at various points in 2007 and 2008, Blech, who in December 2000 was permanently barred from the securities industry for fraud, manipulated the stocks of Pluristem Therapeutics Inc. and Intellect Neurosciences Inc.

The SEC alleged that Blech had control of over 50 brokerage accounts in the names of family members, friends, and a private religious institution.  Blech used the accounts to engage in a complex scheme in which he bought and sold significant amounts of stock in two biopharmaceutical companies.  Blech allegedly established the illusion of an active and liquid market, in otherwise thinly traded securities, thus inflating their stock prices.  Blech also acted as an unregistered broker-dealer by soliciting investors to invest in various companies, including the two biopharmaceutical companies.

The SEC stated that “Blech hoped to avoid scrutiny by devising a complex scheme using accounts ostensibly belonging to family members and friends to place highly manipulative trades through different broker-dealers.  This enforcement action demonstrates the SEC’s ability to dissect such trades and lay bare their true economic substance.”  In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced it was filing criminal charges against Blech.