SEC charges that hedge fund manager (and priest) relied on false claims to promote a Ligand short attack
In an interview with the Wall Street Journal three years ago, Rev. Emmanuel Lemelson boasted that his tiny hedge fund beat out most others on overall performance because of his uncanny ability to know things about stocks “before they happened.”
“I guess it’s just a gift from God,” he told the Journal.
According to the SEC, God also got a big assist from the priest’s willingness to spread false claims on social media when needed. And that turned out to be a very big problem for Ligand Pharmaceuticals.
The SEC fraud charge says that Lemelson, whose original name was Gregory, and his fund Lemelson Capital took a short position on Ligand in 2014 — just before the Journal article appeared — and then schemed how he could make his prediction come true.
The SEC allegations — which Lemelson is stoutly denying — include this note:
Lemelson used written reports, interviews, and social media to spread untrue claims, including that Ligand was “teetering on the brink of bankruptcy” and that Ligand’s investor relations firm agreed with his view that its flagship Hepatitis C drug, Promacta, was going to become obsolete. Lemelson also allegedly misled investors by citing a European doctor’s negative views on the same Ligand drug without revealing the doctor was Amvona’s largest investor and had a significant financial interest in seeing Ligand’s stock price decline.
That was worth $1.3 million to the colorful hedge fund player and Greek Orthodox priest.
“The commission chose to bring this case based upon its enforcement staff’s personal feelings and facts be damned, win-at-any-cost ambitions which have allowed it to ‘make up the rules’ as they go along,” Lemelson replied in a release of his own. “The government’s claims are false and will be proven to be so.”
The alleged scam helps underscore the growing role of social media as a quick avenue for manipulating stock prices, particularly in a volatile field like biotech. In this environment, the right nudge at the right time can send shares scooting higher or plunging lower — and that makes it ripe for abuse.
“While short-sellers are free to express their opinions about particular companies, they may not bolster those opinions with false statements, which is what we allege Lemelson did here,” said David Becker, an assistant director in the SEC’s Division of Enforcement.