Federal authorities are investigating a Centennial biotech company for allegedly defrauding at least 151 investors of more than $10 million by misleading them about new technology to diagnose and treat lung cancer and cardiovascular disease.
The regional office of the U.S. Securities and Exchange Commission filed a case in June 2021 against Cell>Point and its subsidiaries, including Cell Theranostics. And in February, the U.S. District Court in Denver issued a preliminary injunction against the company after the SEC accused Cell>Point of continuing to mislead investors while under investigation.
The decision by U.S. District Judge Philip Brimmer said the SEC proved the defendants had made misrepresentations in violation of the Securities Exchange Act and showed that future violations were likely. The order prohibits the company from making misstatements or withholding pertinent information from investors.
However, Brimmer said he didn’t freeze the company’s assets as the SEC wanted because “defendants do not currently have any significant assets that could be frozen.”
The SEC claims Cell>Point raised money without letting investors know that clinical trials for its main therapy were suspended in 2014. The company also misled investors about the amount of money the company’s founders have contributed and potential deals with foreign investors, the SEC said.
In its motion for the preliminary injunction, the SEC said Cell>Point transferred assets overseas “in an apparent effort to frustrate this enforcement action” and was destroying records of communication with investors.
The SEC’s lawsuit names Greg Colip of Spring, Texas, Cell>Point’s co-founder and CEO, and his brother, Terry Colip of Greenwood Village, co-founder and chief financial officer. It covers the company’s activities from January 2016 through February 2021.
“Defendants’ fraud was continuous and calculated to enrich the individual defendants at the expense of the company’s investors,” the SEC said in a filing.
While the case alleges that Cell>Point and the Colips have misrepresented the status of their clinical trials, the SEC doesn’t take a position on whether the company’s products are viable or beneficial, Kurt Gottschall, the regional director, said in an email.
Greg Colip said in a telephone interview Tuesday that the company takes issue with the allegations.
“We do not believe at all that we have committed any fraud or made any intentional misrepresentations to any of our investors. We have over 600 investors and we’ve maintained a very good, open relationship with our investor base,” Colip said.
The company could have done a better job of informing the investors of “all of the twists and turns that we were going through the last few years” to improve the product, Colip said.
The Colips say Cell>Point is developing a diagnostic tool for lung cancer, cardiovascular disease and other diseases. The Colips and a third person acquired technologies from the University of Texas M.D. Anderson Cancer Center.
The company’s website says it specializes in theranostic nuclear medicine, which uses radioactive compounds to image and treat diseases.
Clinical trials for Oncardia, the company’s lead product, were suspended in 2014 when problems cropped up. From 2015 through 2019, the company successfully addressed a variety of technical issues, bringing it closer to being able to resume clinical trials, according to a court filing by the company.
But the SEC said the company repeatedly indicated that clinical trials were in progress when they weren’t. A drug must successfully go through three phases of trials before a company can seek approval from the Food and Drug Administration.
“As recently as February 2021, the defendants represented to investors that Cell>Point was months away from completing clinical trials of its revolutionary product, Oncardia, that would lead to commercialization and, ultimately, substantial returns for investors,” the SEC said.
Cell>Point’s founders also misled investors about having contributed $38 million to the company and raising more than $104 million, according to the SEC. The agency said the company raised only $56 million from investors since its start and the founders contributed less than $1 million in cash and the units, or membership interests, they gave themselves at no cost when the company was formed.
A pretrial hearing is tentatively scheduled Nov. 18.
Greg Colip said he is confident that when all the facts come out, it will be clear the SEC’s conclusions were “quite possibly misunderstood, misinterpreted.”
“We feel that we will be able to demonstrate that we are not who they are publicly saying we are,” Colip added.
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