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Articles Posted in Securities Fraud

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Lax & Neville LLP is investigating claims involving Amarin, a speculative biotech stock recommended and sold to investors by financial advisors. Amarin is a biopharmaceutical company with one significant commercial product, Vascepa, a fish oil drug designed to reduce cardiovascular risk among patients with elevated risks of cardiovascular events and elevated triglyceride levels.  Amarin’s stock skyrocketed from $3 a share to $18 a share in a single day following the release of positive clinical data in September 2018, (and traded in that range, including in the mid to low $20s during the next 18 months), but declined to low single digits in March 2020 after losing a key patent litigation decision.  See Amarin Pharma v. Hikma Pharmaceuticals USA Inc., Case No. 2:16-cv-02525-MMD-NJK (D. Nev. 2016).  The patent litigation was a known risk to the stock, and eventually caused a collapse in Amarin’s share price.

Upon information and belief, financial advisors at Morgan Stanley and other brokerage firms solicited and concentrated customer accounts in Amarin, even while the company was defending its patent on Vascepa in litigation.  This litigation was a material risk in any Amarin investment.  If generic versions of Vascepa could enter the market, Amarin’s sales would be substantially reduced, and even if the introduction of generic versions did not start right away, the perception that their development would create could also materially impact Amarin’s value and stock price.

Upon information and belief, financial advisors failed to adequately disclose the risks of investing in Amarin and in having concentrated positions in one stock.  Financial advisors have duties, including a fiduciary duty, to provide customers with full and fair disclosure of all material facts, such as the risks of litigation, the ongoing risks of overconcentration; and to diversify an investor’s portfolio.  Financial advisors also have a duty to continually update “buy,” “hold,” and “sell” recommendations for any security.  Financial advisors must develop a suitable plan for customers’ investments, and to recommend transactions and investment strategies only where they have a reasonable basis to believe that their recommendations are suitable for the customer based on the customer’s financial needs, investment objectives, investment experience, risk tolerance, and other information that they know and have obtained about the customer.  An investment in Amarin, particularly in concentrated positions is risky and not suitable for all investors.  The failure by a financial advisor to provide suitable investment advice with fair and balanced risk disclosures is a violation of his or her fiduciary duties and other duties.

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On April 22, 2015, the Securities and Exchange Commission (“SEC”) filed a Complaint in the District Court for the United States Southern District of Indiana, Indianapolis Division (the “Complaint”), against Veros Partners, Inc., Matthew D. Habb, Jeffery B. Risinger, Veros Farm Loan Holding LLC, Tobin J. Senefeld, FarmGrowCap LLC, and PinCap LLC alleging that Veros Partners, Inc. and Mr. Habb, its president, propagated and executed a Ponzi scheme and “fraudulently raised at least $15 million from at least 80 investors … mostly from Veros’ own clients, in two separate farm loan offerings.”

The Complaint states that SEC seeks “to enjoin Defendants from raising additional investor funds, to prevent them from ensnaring more victims in their scheme, and to prevent the further dissipation of investor assets.” The SEC also seeks “the disgorgement of Defendants’ ill-gotten gains, as well as prejudgment interest and significant civil penalties.”

The Ponzi-scheme offerings took place from 2013 to 2014, when investors purchased securities issued by Veros Farm Loan Holding LLC and FarmGrowCap LLC, two companies run by Matthew D. Habb, Jeffrey B. Risinger and Tobin J. Senefeld.  Investors were told that their funds would be used “to make short-term operating loans to farmers for the 2013 and 2014 growing seasons.”  Although some funds were used for the stated purpose, most was used to cover the unpaid debt of the farms, and $7 million was used to pay investors in other, unrelated offerings.  Further, over $800,000 went directly to Matthew D. Habb, Jeffrey B. Risinger and Tobin J. Senefeld for “success” and “interest rate spread” fees.

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