The product sounds great: “The Gold Standard to monitor metastic breast cancer. Our Serum-2 test provides a more accurate representation of HER-2 status, facilitating more appropriate treatment strategies.” NanoMolecularDX is “executing a commercialization strategy” for this test and others. In July is closed on $1 million of seed funding.
I’m an advocate for cancer research and raising money to fight cancer, so this sounds like a good thing. It also has an affiliated entity, MetaboRX that is a “preclinical stage biopharmaceuticals enterprise based on pioneering research in fatty acid metabolism.”
The Securities and Exchange Commission also wants to know. The SEC filed a complaint against NanoMolecularDX and its manager, Patrick Muraca.
“According to the SEC’s complaint, Patrick Muraca established two pharmaceutical development companies and raised nearly $1.2 million by representing to investors that their money would be used to develop products to detect cancer and other diseases. The SEC has traced the flow of investor funds into Muraca’s personal bank account and alleges that at least $400,000 has been used to pay rent for the restaurants and fund other purchases by Muraca, including payments to a casino, automotive shop, and cigar shop.”
According the SEC complaint Mr. Muraca used the money he raised for personal expenses: mortgage, groceries, and gas. He also used $45,000 of the investors’ money to pay the rent and expenses for his fiancee’s restaurant business. Once that went out of business he spent another $30,000+ to start a new restaurant.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Muraca.
“As alleged in our complaint, we’re intervening to protect investors because Muraca has veered from his stated intentions and has been using their money for purposes other than the fight against cancer and other diseases.” – Paul Levenson, Director of the SEC’s Boston Regional Office
Great job by the SEC’s Boston Office to identify the fraud and shut it down before Muraca was able to scam any more investors.
What compliance lessons can we learn from the case?
Corporate filings do matter. Any investor could have pulled up the filing Massachusetts filing and noticed that strange purpose. I generally don’t find the filings with the secretary of state to be incredibly useful. But sometimes you do find a red flag like this to stop you in your tracks.
As I mentioned above, I’m raising money for the Dan-Farber Cancer Institute for the Pan-Mass Challenge. 100% of your donation is passed through to DFCI. I’m riding my bike for three days and 250+ miles. I appreciate the generous support I have received from so many of the readers of Compliance Building. You can donate through any of the links below.