The Securities and Exchange Commission recently announced that it reached a settlement with Florida resident Curt Ludwig Dewitz, a former executive for biopharmaceutical company Cytocom, Inc., to resolve insider trading charges associated with unlawful trades involving the purchase of securities of two separate companies, one of which was eventually acquired by his employer.
According to the SEC’s complaint, Dewitz was hired as Cytocom’s Director of Business Development to find a public company with which to merge so that it might become a publicly-traded entity. After negotiations with Cleveland BioLabs were underway, Dewitz began having daily calls with Cytocom’s CEO regarding the acquisition, and Dewitz allegedly began purchasing Cleveland BioLabs common stock following these calls. During one of these calls, Dewitz had discussed the possibility of trading in Cleveland BioLabs stock and was cautioned not to trade ahead of the merger announcement, according to the complaint. Despite the warning, the stock purchases allegedly continued. Shortly before the merger announcement, Dewitz also purchased stock in Immune Therapeutics, the company that formed Cytocom, while in possession of MNPI regarding the impending merger. Following the merger announcement, the stock prices of Cleveland BioLabs and Immune Therapeutics rose by 46 percent and 33 percent, respectively, enabling Dewitz to allegedly generate approximately $70,000 in illicit profits.
In its complaint, which was filed in the Northern District of Florida, the SEC charged Dewitz with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) thereunder. In the settlement, Dewitz consented to the entry of a final judgment against him without admitting or denying the SEC’s allegations. He agreed to be permanently enjoined from committing future securities violations and was barred from serving as an officer or director of a public company. Dewitz was also ordered to pay disgorgement of $70,382.96, prejudgment interest of $14,809.53, and a civil penalty of $70,382.96.