Nutra Pharma Corp (NPHC)

[Goofy R]

"FRAUD AND MANIPULATION-Maker-of-purported-cobra-venom-drug-cannot-slither-away-from-fraud-claims!!"

NPHC/RIK LIED ABOUT DISTRIBUTION DEALS WITH CANADA, INDIA, AND GERMANY... JUST TO NAME A FEW!!!

RIK IS FINISHED!!

By Amy Leisinger, J.D.
[url]
https://research.cch.com/DailiesBrowser/article/sld01a39f741e7d8e1000ae3b005056881d2306?date=02%2F04%2F2020&cpid=WKUS-Legal-Cheetah&user=[e-mail]&subject=SRD&daid=WKUS_TAL_6445&ids=sld01a39f741e7d8e1000a6ea005056881d2302,sld01a39f741e7d8e10008b2d005056881d2303,sld01a39f741e7d8e1000ab3d005056881d2305,sld01a39f741e7d8e1000ae3b005056881d2306,sld01a39f741e7d8e1000970c005056881d2307,sld01a39f741e7d8e10008fd6005056881d2309&pa=TEMP-100034370&an=OPSALLLegal&selected=sld01a39f741e7d8e1000ae3b005056881d2306[/url][tag]ARTICLE[/tag]

EXCERPTS:

...The company made some disclosures sufficient to enable investors to make informed decisions, but many others omitted information that would have been material to its investors.

According to the court, while certain press releases were sufficiently effective given the inclusion of video links containing more information, others did not contain enough information to prevent them from being misleading, and claims based on these press releases may proceed. Further, the court stated, the Commission has sufficiently alleged that the owner of the company worked with a solicitor that was not properly registered with the SEC. The court also ordered the Commission to amend its complaint to directly connect its factual allegations with specific violations (SEC v. Nutra Pharma Corporation, March 31, 2020, Seybert, J.).

Alleged misconduct. Between 2013 and 2018, Nutra Pharma purported to sell two pain relievers that were made with cobra venom. In 2013, Nutra Pharma entered into a consulting agreement with Wall Street Buy to promote Nutra Pharma’s stock to investors, and Nutra Pharma agreed to pay cash and shares for the service and to issue a $30,000 note convertible to Nutra Pharma shares to Wall Street Buy. Thereafter, Nutra Pharma issued press releases, neither of which referenced the consulting agreement.

In June 2015, Nutra Pharma’s owner paid SeeThruEquity $8,000 for a research package and issued a press release noting that SeeThruEquity’s "research is not paid for and is unbiased." Around this time, Nutra Pharma issued press releases and made statements in SEC filings regarding potential distribution of its product in Canada. Thereafter, Nutra Pharma announced that it had completed upgrades to the reptile farm used in the production of the pain relievers, but, according to the SEC, Nutra Pharma never produced the drugs or owned cobras or cobra facilities.

Throughout this time, Nutra Pharma’s owner was engaged in trading in the company’s stocks but was ultimately dismissed by two broker-dealers for concerns about manipulation. The owner then retained a former broker-dealer (unregistered and barred by FINRA in 2001), who began to solicit investments in Nutra Pharma.

Material misstatements and omissions. The defendants argue that the firms they engaged were responsible for disclosing that Nutra Pharma had paid them, the court noted, but the SEC claims that, because they made statements about the endorsements, the company had a duty to speak accurately by disclosing the payments. As to the See Through Equity press releases, Nutra Pharma specifically said that the promoter was not compensated when Nutra Pharma had paid for the promotion and Nutra Pharma’s owner had approved the report. Nutra Pharma had a duty to be accurate in its statements, and the claims based on these reports may proceed, according to the court.

Further, the court found, the SEC adequately alleged that press releases regarding global distribution contained material misrepresentations. These releases imply that new orders and increased demand was occurring, according to the court, but Nutra Pharma and its owner knew this was not happening: True statements that create a materially misleading impression support claims for securities fraud, the court stated.

However, the court noted, the Wall Street Buy releases provided links to videos where the company disclosed the arrangement with Nutra Pharma. While the information possibly should have been included in the written press releases, the inclusion of the links is sufficient disclosure, the court found, and the allegations regarding the Wall Street Buy releases must be dismissed.

Scienter. The court noted that the promoter and distribution releases paint an inaccurate picture of Nutra Pharma and its business and that the owner was in control of Nutra Pharma’s statements. The SEC allegations adequately demonstrate that the defendants took the actions they did because they were profitable, the court explained, and a lack of scienter is not a basis to dismiss the fraud allegations with respect to the press releases. In addition, the court found, issues relating to Nutra Pharma’s owner’s mental state and reasons for making his trades are issues of fact that cannot be resolved on a motion to dismiss.

Other issues. The court also concluded that the SEC plausibly alleged that the former broker-dealer induced securities transactions as a "consultant" for Nutra Pharma and received compensation. He participated in negotiations between Nutra Pharma and investors, and, as such, the court found, the claim against him for unregistered activity as a broker-dealer may proceed.



The case is No. 18-CV-5459(JS)(GRB).

Attorneys: Lara Shalov Mehraban for the SEC. Daniel Desouza (DeSouza Law, P.A.) for Nutra Pharma Corp. Carl F. Schoeppl (Schoeppl & Burke, P.A.) for Erik Deitsch a/k/a Rik Deitsch. Sean Peter McManus, pro se.

Companies: Nutra Pharma Corp.

LitigationEnforcement: BrokerDealers Enforcement FraudManipulation GCNNews NewYorkNews