A Bay State biotech company will pay more than $17 million to settle charges that its executives lied to investors and used their money for personal expenses, including massages and leasing a BMW.
"They were lying about what they had to sell, how soon it was likely to get to market, how and whether it was under the governmental approval processes and how much their company might be worth," said Paul Levenson, regional director of the Securities and Exchange Commission's Boston Regional Office.
Danvers-based BioChemics was accused of defrauding investors from 2009 until mid-2012, falsely claiming that:
• The company had partnerships with other drug companies.
• Two drugs were under FDA review.
• The company had been valued at more than $1 billion when it had an internal valuation of $200 million.
BioChemics raised more than $15 million from at least 70 individual investors for a transdermal drug delivery system it claimed it was developing.
John Masiz, the founder of BioChemics, Gregory Kroning and Craig Medoff also were named in the initial SEC complaint.
"Investor funds were used to pay for personal expenses of Masiz (such as meals, massages, clothing and sporting goods) and Kroning (such as a leased BMW automobile)," the complaint said.
BioChemics must pay more than $17 million to the SEC, including "ill-gotten gains," interest and a $750,000 penalty, the SEC said. The SEC will then seek to repay investors.
A lawyer representing BioChemics did not respond to requests for comment.
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