The biotech RenovaCare (OTCMKTS: RCAR) announced that it has received a civil complaint from the Securities and Exchange Commission (SEC).
The SEC accuses Harmel S. Rayat, a controlling shareholder and chair of RenovaCare, of orchestrating a secret promotional campaign to elevate the company’s stock price. The agency claimed that Rayat and RenovaCare worked with the financial publishing firm StreetAuthority to release a press release and Form 8-K with inaccuracies and omissions in 2017 and 2018. SEC concluded Rayat tried to hide his involvement in the campaign by channeling payments to StreetAuthority through a third party.
The company intends to defend itself against the allegations of securities fraud.
In its complaint, the SEC reports that the OTC Markets Group overseeing the OTC stock market sent RenovaCare a letter demanding that it disclose its promotional efforts. “On January 8, 2018, rather than acknowledging Rayat’s and the company’s involvement in the StreetAuthority promotion, Rayat and RenovaCare made and publicly disseminated a press release that contained material misrepresentations and omissions that denied any involvement in StreetAuthority’s promotion,” the complaint concluded.
The SEC is seeking a jury trial and a permanent injunction, and civil penalties against Rayat and the company. If convicted, RenovaCare and Rayat may face civil penalties. SEC also intends to bar Rayat from serving as an officer or director of a public company.
In a statement, the company stressed that it “strongly disagrees with statements in the [SEC] Complaint and is disappointed with the action taken by the agency.”
RenovaCare also stated that it intends to cooperate with the SEC fully.
RenovaCare is working on an experimental burn-wound healing medical device that uses autologous stem cells. The device sprays the cells onto wounds.
The company recently received an Investigational Device Exemption from the FDA, permitting the company to launch a clinical trial to test the safety and efficacy of its SkinGun and CellMist technology to treat burn wounds.