From MOXReports:
Behind the scenes with Dream Team, CytRx and Galena
Note: At least 13 recent articles covering CytRx have been removed from circulation at Seeking Alpha, the Wall Street Cheat Sheet, Motley Fool and Forbes. Many were removed in just the past two days. A list of these removed articles is shown at the bottom of this article. The author has preserved PDF copies of these articles at MoxReports.com.
In total, more than 100 articles tied to The Dream Team have now been removed from circulation in just the past two days.
Overview
A few weeks ago I received a surprising email asking me to be a paid stock tout for IR firm “The Dream Team Group”. I was asked to write paid promotional articles on Galena Biopharma (GALE) and CytRx Corp (CYTR), without disclosing payment. Rather than refuse outright, I decided to investigate. I began submitting dummy articles to the Dream Team rep (with no intention of ever publishing them). My goal was to determine how involved management from these two companies were in this undisclosed paid promotion scheme. Below I will provide detailed documentation (emails and attachments) which indicate that management from both Galena and CytRx were intimately involved in reviewing and editing the paid articles on their own stock at precisely the time they were looking to sell / issue shares.
Management will have a very difficult time convincing investors that “we didn’t know”. The articles were provided from Dream Team directly to CytRx and Galena. Management then edited and approved the articles and would have seen the lack of disclosure. When they appeared in final publication there was again no disclosure. And it seems no coincidence that there appears to have been great urgency to get these articles in almost exact proximity to sales / issuances of stock by insiders and the companies at both Galena and CytRx.
Many investors are aware that Galena was previously a subsidiary of CytRx and that the CEO of CytRx also sits on the board of Galena.
The promotional articles and the paid retention of the Dream Team Group were coordinated with the release of news and data from the companies such that they coincided with the share prices of both stocks rising dramatically. News events included items like the completion of Phase 2 trials, the inception of new trials and the receipt of an SPA from the FDA. Clearly these would all normally be expected to have a positive effect on their own. Yet management used coordinated articles in the media to interpret and amplify the effect of the news which it had released.
The promotional campaigns by Dream Team extended to various web sites including Forbes, TheStreet.com, Motley Fool, Wall Street Cheat Sheet and Seeking Alpha. Multiple aliases were used, some of which pretended to be hedge fund managers. At least 13 articles on Cytrx alone have now been removed, most during the past two days alone.
The undisclosed media promotions coordinated with the release of news and data saw both of these stocks rise from around $2.00 in November to around $8.00 by January. The fact that these recent news releases were concurrent with undisclosed stock promotions casts significant doubt on many of the fundamental statements made by these companies regarding their drug prospects.
Below I include a review of Federal Securities Laws Section 17b (regarding touting) and Section 10b(5) (the anti-fraud provision). Given that the recent equity offering from CytRx occurred on the back of this undisclosed promotion, it creates the potential that the proceeds from the offering may be at significant legal risk. Investors who bought into the offering at $6.50 are already well underwater. They may find these promotions to have been very disturbing in the context of their flagging investment.
Broader awareness of these issues could see the share prices of both CytRx and Galena trade to well below $2.00, back where they were when the promotions began.
Preliminary notes
Note #1: Shortly prior to publishing this article, the author notified the United States Securities and Exchange Commission about the details described herein. Portions of this content were also shared with media outlets including Seeking Alpha, the Wall Street Cheat Sheet and TheStreet.com which had previously published articles by Dream Team writers.
Note #2: Prior to publication, the author contacted CytRx Corp, Galena Biopharma, and Michael McCarthy of Dream Team Group. Their responses are noted in Appendix II.
Note #3: During the course of this investigation I have exchanged dozens of emails with individuals who admit to promoting CytRx, Galena and other companies in exchange for undisclosed payments. I have included copies of some of these emails as links below. These should be read from bottom to top so as to be read in chronological order. In some cases, certain personal information including email addresses and phone numbers have been redacted and are displayed as XXXXX in red font. The author also has numerous additional emails which he is still processing and which have not been included in this article.
Note #4: Before I undertook any of this, I first sent an email to a neutral 3rd party and to my attorney letting them know about this experiment and putting into advance writing the fact that at no time would I ever publish any of these articles nor would I accept any compensation. This was for my own protection. I strongly discourage readers from engaging in this type of research on their own.
Note #5: Dream Team also operates via a sub-brand called Mission IR. I have used Mission and DTG interchangeably throughout this article. Mission IR is a frequent poster of messages at Investors Hub. Their page on Investors Hubprovides a list of companies for which they have recently been engaged. (It also includes several obvious decoys such as Facebook and Twitter).
Background
A few weeks ago I received an email and subsequent phone calls asking me to be a paid stock tout for an IR firm called The Dream Team Group (“DTG”). The sender first informed me about an article he wanted on CytRx Corp. , and later asked for additional articles on Galena Biopharma , among others.
This was a notably odd invitation for me to receive given that I generally write very negative articles focused on inappropriate (and sometimes what I view as illegal) behavior by US listed companies and their promoters. It was clear that the individual contacting me had not even bothered to read what I have written in the past. He clearly had no idea what he had just stumbled into by contacting me of all people.......MUCH MORE
HT: Read This, Spike That
