Chairman of Boston Biomedical Company Arrested for Fraud

The chairman of a Boston-based biomedical company was arrested Tuesday morning on charges arising out of his participation in a scheme to defraud the market for the publicly traded stock of the company, according to U.S. Attorney Carmen Ortiz.

Edward Withrow, 51, of Malibu, California, was charged in U.S. District Court in Boston with one count of conspiracy, one count of securities fraud, two counts of wire fraud, and two counts of making false statements.

Withrow’s co-conspirator, Marco Babini, 54, was charged with one count of conspiracy, one count of securities fraud, and two counts of wire fraud. Babini, who is believed to reside in Vancouver, Canada, remains at large.

In a parallel action, the Securities and Exchange Commission (SEC) announced securities fraud charges against Withrow, Babini, and a third individual, Samuel Brown, in connection with the scheme. In addition, the SEC charged Withrow with failing to disclose his stock holdings in accordance with federal rules and regulations.

According to the indictment, in November 2012, Withrow became the chairman of Endeavor Power Corporation (Endeavor), a Boston-based biomedical company focused on infectious diseases, and became a significant owner of Endeavor’s stock. Around that time, Withrow, Babini and at least one other individual, allegedly orchestrated a promotional campaign and engaged in manipulative trading designed to inflate investor interest in Endeavor’s publicly traded stock.

At that time, Withrow and Babini concealed their significant control over Endeavor’s publicly traded stock from potential investors. In March 2013, the SEC suspended trading in the securities of Endeavor, which stopped the scheme in progress. Thereafter, when Withrow was questioned under oath by SEC attorneys about the Endeavor scheme, he lied about his and others’ involvement.

The charges follow a multi-year investigation focusing on preventing fraud in the microcap stock markets. Microcap companies are small publicly traded companies whose stock often trades at pennies per share. Fraud in the microcap markets is of increasing concern to regulators as such markets have proven to be fertile grounds for fraud and abuse.

The details contained in the indictment are allegations. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.