Pixarbio founder & CEO Frank Reynolds reportedly faces two decades behind bars after a jury yesterday convicted him of defrauding investors of nearly $13 million.
Federal authorities arrested Reynolds, longtime friend and Pixarbio employee Jay Herod and PixarBio CIO Kenneth Stromsland in April 2018 on securities fraud charges, claiming they misled investors about the opioid substitute it claimed to be developing. Herod and Stromsland both pleaded guilty and each testified at Reynolds’ trial, the Boston Globe reported.
The trio made manipulative trades in PixarBio shares, defrauding more than 200 people of some $12.7 million, prosecutors alleged, after billing its NeuroRelease product as the end to “thousands of years of morphine and opiate addiction.” But the drug was actually an older anti-convulsant called carbamazepine, sold under the trade name Tegretol that PixarBio planned to re-formulate the drug as a time-release injection. Reynolds, who claimed to have engineered his own recovery after being paralyzed in a 1992 car accident, allegedly pledged “a HUGE return on investment (ROI) for any investors in PixarBio’s NeuroRelease.”
After a 14-day trial and two days of deliberation, the U.S. District Court for Massachusetts jury returned guilty verdicts on all three counts, convicting the InVivo Therapeutics (NSDQ:NVIV) founder on one count of securities fraud and three counts of obstruction related to a U.S. Securities & Exchange Commission investigation, according to the news paper.
The fraud charge reportedly carries a maximum sentence of 20 years; Reynolds is slated to be sentenced Feb. 6, the paper reported.
Former malpractice lawyer debunks paralysis claim on the stand
In a 2010 TEDxBoston talk he gave as CEO of InVivo, Reynolds said he wanted to use the lessons learned from his travails to help other paralyzed patients. But the attorney that represented Reynolds in a $750,000 medical malpractice settlement over a spine surgery testified that the claim never alleged paralysis and contradicted his claim of being bedridden for five years, the Globe reported.
“I don’t recall him being bedridden for that kind of period of time,” former Reynolds lawyer Joseph Messa Jr. told the jury, according to the report.