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Associate of PixarBio founder pleads guilty in fraud scheme

A friend of the controversial founder of a Medford biotech has pleaded guilty to two federal charges in connection with a scheme to defraud investors and manipulate the company’s stock price.

M. Jay Herod, 52, of Cambridge, pleaded guilty Friday to securities fraud and to obstruction of an agency proceeding. The latter related to an investigation by the Securities and Exchange Commission.

Herod, a longtime friend of Frank Reynolds, founder of PixarBio Corp., admitted that beginning in December 2016 he engaged in manipulative trades of the biotech startup’s stock to inflate its price and trading volume. He also admitted to sharing proceeds with Reynolds and PixarBio itself, according to federal prosecutors.

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As part of the plea deal, he also admitted that over nine months in 2017, he made false statements to the SEC and provided a backdated document to obstruct the agency’s investigation, prosecutors say.

The most serious charge, securities fraud, carries a maximum prison sentence of 20 years.

Reynolds has pleaded not guilty to similar charges in connection with the alleged scheme, which federal authorities say defrauded more than 200 people who had invested about $12.7 million.

Herod is the second Reynolds associate to plead guilty in the criminal case.

In September, Kenneth Stromsland, PixarBio’s vice president of investor relations, pleaded guilty to securities fraud and obstruction. Like Herod, he awaits sentencing.

PixarBio was supposedly developing a non-opioid pain reliever that Reynolds predicted would end “thousands of years of morphine and opiate addiction.”


Jonathan Saltzman
can be reached at jsaltzman@globe.com.