The Securities and Exchange Commission (SEC) has filed complaints in U.S. District Court, Western District of Washington, against a biotechnology company--CellCyte Genetics Corporation, based in Bothell, WA, its CEO and Chairman Gary Reys, and Ronald Berninger, CellCyte's Chief Scientific Officer and a member of the Board of Directors. In the civil complaint, the SEC says CellCyte and Reys misled the investing public with regard to CellCyte's product, a supposed stem cell therapy.

According to the allegations in the complaint, CellCyte claimed to have U.S. Food and Drug Administration approval and an Investigational New Drug application, and was about to start human clinical trials with the stem cell compound to repair the human heart. The SEC says that CellCyte only had a license for a very early stage technology; had failed to disclose that it was unable to obtain a specially formulated compound from a European biotechnology company that had originally funded the stem cell research; had not determined how to produce the stem cell compound, and had not actually satisfied any FDA requirements to begin human clinical trials.

Nonetheless, the complaints state, CellCyte made "false and misleading" statements in several SEC filings and other materials distributed to potential investors concerning late-state stem cell research and clinical trials. The SEC says Berninger allegedly originally approved or participated in the drafting of many of the statements. In 2007, a promotional campaign on behalf of CellCyte included spam emails, blast faxes, and newsletters containing the statements, some from CellCyte's own investor materials. The promotion enabled CellCyte's stock price to rise to a high of $7.50 per share, with a 50-fold increase in trading volume.

The SEC says in the CellCyte SEC filings and in other investor materials, CellCyte claimed that during its research using the special compound, stem cells migrated directly to bone marrow, which would increase effective dose of the cells for engraftment. The complaint states that Berninger knew the preliminary research had not shown stem cells migrating to the bone marrow as claimed, and CellCyte never conducted research involving bone marrow, and had no data showing that the compound enabled stem cells to improve bone marrow engraftment.

The SEC is seeking a court order enjoining CellCyte, Reys and Berninger from future violations of the federal securities laws, requiring Reys and Berninger to pay a civil monetary penalty, and barring them from serving as an officer or director of a public company, and other relief.

The allegations above are from federal civil complaints filed by the SEC. The complaints may be accessed at: http://www.sec.gov/news/press/2009/2009-195.htm

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