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Phillip Frost settles civil stock-fraud charges with SEC

Dr. Phillip Frost and his wife Patricia were on hand as the Miami-Dade County Commission prepared to vote on the tax-funded Frost Museum construction bailout.
Dr. Phillip Frost and his wife Patricia were on hand as the Miami-Dade County Commission prepared to vote on the tax-funded Frost Museum construction bailout. emichot@miamiherald.com

Phillip Frost, the billionaire Miami philanthropist and chair and CEO of pharma group OPKO Health, Inc., said Thursday he had reached an agreement with the Securities and Exchange Commission to settle a civil complaint of stock fraud.

“We have reached agreement with the SEC that will end a potentially expensive, contentious and time-consuming litigation and I am happy that we can focus on an exciting and productive 2019 for OPKO Health,” Frost said in a statement.

Frost, the namesake of Miami’s new science museum, and OPKO were charged in September with participating in a scheme that involved artificially inflating the price of penny stocks. This was allegedly done through maneuvers including paying bloggers to tout the companies without disclosing those payments.

Without admitting or denying the SEC’s allegations, Frost, 82, agreed to pay a $5.5 million penalty and a ban, with certain exceptions, on trading in penny stocks. OPKO agreed to pay a $100,000 penalty. The settlement must still be approved by a court. Frost’s Gamma Investments Trust, an investment vehicle controlled by Frost and named as a defendant in the SEC’s complaint, also settled, agreeing to a bar on trading in penny stocks.

Frost will continue to serve as OPKO’s CEO and Chairman. In September, Frost stepped down as chairman of financial group Ladenburg Thalmann, a position he had held for more than a decade. This week, Ladenburg purchased stock and options from Frost, the company’s largest shareholder, for $130.25 million. He now owns less than 5 percent of its outstanding shares.

Of the 10 individuals named in the SEC’s initial complaint, only Frost and John H. Ford, one of the alleged penny stock promoters, have settled. The other individuals, including Barry Honig, a South Florida-based investor whom the SEC named in its complaint as the pump-and-dump scheme’s “primary strategist,” have until Feb. 8, 2019, to enter a formal plea.

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