A 2018 Securities and Exchange Commission civil enforcement action that accused prominent Miami billionaire and philanthropist Dr. Phillip Frost, biotech and cryptocurrency investor Barry Honig, and more than a dozen others of orchestrating illegal “pump-and-dump” schemes in three microcap companies has effectively collapsed following damaging cross-examinations of the government’s key cooperating witnesses.
The case, filed in the Southern District of New York, centered around allegations that Honig led a secret “control group” that accumulated large stakes in MabVax Therapeutics Holdings Inc. (MBVX) and two other issuers, then used paid promotional articles containing false statements to artificially inflate share prices before selling.
After six years of contentious litigation and tens of millions of dollars in legal fees, the SEC’s core allegations have been discredited, primarily through admissions made under oath by the agency’s own witnesses.
The “Smoking Gun” Cross-Examination of MabVax CEO David Hansen
Central to the SEC’s case against Honig was testimony from David Hansen, the former CEO of MabVax Therapeutics, a clinical-stage biotechnology company developing cancer treatments that ultimately failed and filed for bankruptcy.
Hansen, who faced an SEC and FBI investigation over MabVax’s own disclosures, cooperated with the government and claimed Honig and his associates forced the company to accept investments and were responsible for false promotional articles.
During a 2024 deposition, however, Hansen was confronted with his own investor-presentation materials from a major biotech conference. The materials contained identical language verbatim to passages he had previously sworn under oath were fabricated by Honig associate John O’Rourke III for a promotional article.
After reviewing the documents on the stand, Hansen acknowledged he “must have made a mistake” in his prior testimony, which implicated the defendants with the government. Defense counsel described the moment as exposing perjury by the government’s star witness. Hansen perjured himself at least twice, which is a felony under federal and state statutes.
One defense attorney wrote to co-counsel: “I can’t recall finding a smokier smoking gun than this in all my years of practice.”
Damage Control: Did Second Cooperating Witness John Ford Change His Testimony To Make A Deal?
A similar reversal occurred with journalist John Ford, whom the SEC accused of accepting undisclosed compensation from Honig to publish exaggerated articles about MabVax.
Discovery materials showed that drafts of Ford’s article contained tracked changes and margin comments authored by Hansen himself. FBI 302 reports from three separate interviews with Ford revealed that he twice denied receiving any payment or shares from Honig or his associates. Only in a third interview did Ford claim he was “compensated” by being allowed to purchase shares of an unrelated public company on the open market.
“Control Group” Theory Called Into Question
The SEC’s complaint alleged that Honig coordinated a group, including Dr. Phillip Frost, chairman of OPKO Health and a widely respected philanthropist, that collectively acquired more than 10% of MabVax without disclosing their supposed agreement to control the company.
Defendants have pointed out that Frost, then in his early 80s, never sold a single share and had no prior relationship with most alleged group members. Defense filings describe the notion that Frost was “controlled” by Honig as implausible on its face.
Political Contributions by Lead Prosecutor Raise Eyebrows
Sources familiar with the investigation say the case was driven in part by former San Francisco-based DOJ prosecutor Benjamin Kingsley, who worked closely with the SEC’s enforcement division. Federal Election Commission records show Kingsley made dozens of individual contributions to Democrat candidates and organizations in recent years.
While prosecutors are permitted to make political donations, it can be argued that the contributions, combined with the eventual collapse of the government’s evidence, feed perceptions of politically motivated enforcement.
The original SEC investigation began during the Obama administration, a period that saw other controversial initiatives such as Operation Choke Point, which unfairly targeted certain industries, “including gun and ammunition industries, and the crypto industry.”
While attorneys for Honig declined to comment on ongoing litigation, publicly available court filings and transcripts, which I have reviewed, demonstrate that the government’s case rested on unreliable cooperating witnesses, who later recanted key assertions under oath.
In one email a source sent to me, when asked if he had reviewed the transcripts, a previous counsel for the SEC’s enforcement division said, “Boy did I ever. I kind of couldn’t put the transcript down. I’m not sure I’ve ever encountered such an unprepared witness. How could his lawyers not have known the bloodbath was coming? This should have pulled the teeth on the cross by covering it all on the direct examination and having him correct the prior interrogatory.”
The SEC declined to comment on active or recently resolved enforcement matters.
However, the outcome of this case has renewed debate over the use of cooperating witnesses facing their own liability and the resources required to defend against large-scale SEC enforcement actions that ultimately fall apart after years of litigation and never-ending legal fees.
The post SEC’s High-Profile Pump-And-Dump Case Against Miami Billionaire Dr. Phillip Frost And Investor Barry Honig Unravels After Six Years Of Litigation appeared first on Loomered.
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