Miami Philanthropist Charged In $27 Million Stock Fraud

MIAMI, FL — Dr. Philip Frost, for whom Miami's Phillip and Patricia Frost Museum of Science was named among a number of other South Florida art and cultural institutions, was charged Friday with participating in a $27 million stock investment scheme. Frost and nine others were accused of manipulating stock prices in what the Securities and Exchange Commission described as "classic pump-and-dump" schemes.

A Miami biotech billionaire, Frost allegedly participated in two of three schemes allegedly orchestrated by businessman Barry Honig. Federal stock regulators in Washington, D.C. said that the unlawful stock sales caused "significant harm to retail investors who were left holding virtually worthless stock." Honig allegedly "orchestrated the acquisition" of large quantities of the issuer's stock at steep discounts.

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"Honig and his associates engaged in illegal promotional activity and manipulative trading to artificially boost each issuer’s stock price and to give the stock the appearance of active trading volume," according to the SEC. "Honig and his associates then dumped their shares into the inflated market, reaping millions of dollars at the expense of unsuspecting investors."

Frost Science issued a statement of support after the charges were announced on Friday. "We are extremely grateful for the support of Dr. Phillip and Patricia Frost who are steadfast in their commitment to education, science and technology," the museum said. "Without their dedication, the museum would not be here today."

In 2011, Frost and his wife committed $35 million to the science museum in order to secure the naming rights and then made another $10 million gift for the museum’s planetarium, which was also named after the couple.

Their philanthorpic contributions have touched a number of institutions, both in and outside of South Florida. In 1986, they gifted their 113-piece collection of American abstract art to the Smithsonian Institution. In 2004, they endowed The Patricia and Phillip Frost School of Music at the University of Miami. Two years later they were the lead donors for The Patricia and Phillip Frost Art Museum at Florida International University. Prior to the opening of the science museum in 2017, they helped the University of Miami open the Patricia Louise Frost Music Studios for music students and faculty.

"Honig and his associates engaged in brazen market manipulation that advanced their financial interests while fleecing innocent investors and undermining the integrity of our securities markets,” said Senior Associate Director Sanjay Wadhwa with the SEC’s Division of Enforcement. “They failed to appreciate, however, the SEC’s resolve to relentlessly pursue and punish participants in microcap fraud schemes.”

Charged in the indictment were Honig, John Stetson, Michael Brauser, John R. O’Rourke III, Mark Groussman, Frost, Elliot Maza, Robert Ladd, Brian Keller, John H. Ford, Alpha Capital Anstalt, ATG Capital LLC, GRQ Consultants Inc., HS Contrarian Investments LLC, Grander Holdings Inc., Melechdavid Inc., OPKO Health Inc., Frost Gamma Investments Trust, Southern Biotech Inc., and Stetson Capital Investments Inc. They were charged in U.S. District Court in Manhattan with violating antifraud, beneficial ownership disclosure, and registration provisions of the federal securities laws.

The investigation is being conducted out of the SEC's New York Regional Office by Katherine Bromberg and Charu Chandrasekhar of the Enforcement Division’s Retail Strategy Task Force, Tim Nealon, Ricky Tong, Joseph Darragh, and Michael Paley of the Enforcement Division’s Microcap Fraud Task Force, and Jon Daniels of the Enforcement Division’s Cyber Unit, with the assistance of Edward Janowsky and Steven Vitulano of the New York Regional Office Broker-Dealer and Exchange Examination Program. The litigation team includes Nancy Brown, Bromberg, and Daniels under the supervision of Wadhwa.

Frost serves as chairman and CEO of OPKO Health, Inc. of Miami, which is involved in the discovery, development and commercialization of proprietary pharmaceutical and diagnostic products. He also chairs Ladenburg Thalmann, a diversified investment bank.

Phillip Frost photo by John Parra/Getty Images for MA Design International Limited