Federal securities regulators on Friday filed civil fraud charges against BioChemics Inc. of Danvers and its chief executive, alleging that he lied to investors in a scheme to raise $9 million.
The Securities and Exchange Commission said BioChemics and its chief, John J. Masiz of Topsfield, and two other men ran a fraudulent scheme that raised at least $9 million from 70 investors in 19 states, according to a complaint filed in federal court in Boston.
According to the complaint, Masiz and two men hired to recruit investors misrepresented the company’s progress with its products — creams and gels that deliver drugs through the skin. Masiz and the agents allegedly touted research-and-development collaborations that had ended or never materialized. They also misled investors, the SEC alleges, about results of clinical trials and the company’s value.
The defendants failed to disclose to investors that Masiz had been the subject of a prior SEC fraud action, regulators said. They allegedly told investors their money was going to clinical trials and operating expenses, when in fact funds were used to pay Masiz’s personal expenses, including meals, massages, and sporting goods, the complaint said. One of the men used funds to pay for a leased BMW.
Jason C. Moreau, a lawyer for the company and Masiz, said in a statement, “We find the SEC’s allegations in this matter to be entirely without merit. BioChemics is a very promising company with a bright future.’’
In 2004, the SEC barred Masiz for five years from serving as an officer or director of a public company in a case involving VASO Active Pharmaceuticals Inc., a BioChemics subsidiary. The regulators want him barred again and are requesting that the defendants return profits and pay penalties.
The other defendants are Craig Medoff of New York City and Gregory S. Kroning of Norwood, N.J. In 1995, Medoff was barred from working for a brokerage firm or investment company and pled guilty to two counts of conspiracy to commit securities fraud in a criminal case.
Medoff, reached by telephone, denied wrongdoing and said he cooperated with the SEC. “I’m going to fight this vigorously. I’m sure I will be vindicated,’’ he said, noting that he brought in only two investors, both of whom, he said, got their money back.
Kroning was barred from the industry for a year by the New York Stock Exchange and is not affiliated with a broker-dealer, the SEC said. His attorney declined to comment.Beth Healy can be reached at firstname.lastname@example.org.