Hudson Bay Capital tied to Barry Honig Pump and Dump Ring : MabVax $MBVX

A San Diego-based Biotech company named in the Securities and Exchange Commission’s stock manipulation case against small-cap investor Barry C. Honig has come out swinging by naming another hedge fund that’s allegedly part of the Team Honig pump and dump ring. In a lawsuit filed in Superior Court of California this week, MabVax Therapeutics Holdings details how New York-based Hudson Bay Capital played a pivotal role in inducing the company to go public via a reverse merger so that Barry Honig and his crew could take control of the board and manipulate the stock. Hudson Bay is run by Sander Gerber, who manages $6.8 billion in assets under management. San Francisco attorney Jonathan Shapiro of Baker Botts LLP brought the lawsuit on behalf of MabVax. Hudson Bay also stands accused of hiding Honig’s investment in the initial money that led to MabVax going public.

The hedge fund was previously found violating regulation M, which says you can’t short a company that you have also made a PIPE investment in, by the SEC for a period of four years and ordered to pay a fine. The regulator has alluded to Hudson Bay’s role in the Barry Honig stock manipulation case but only names them as company H in the amended complaint filed last month.

MabVax is a clinical-stage biotechnology company that was working to develop treatments for pancreatic cancer, soft tissue cancer, and ovarian cancer. In early 2014 the biotech company was invited to give a presentation to a charity with the enticement that the non-profit charity wanted to give MabVax a $500,000 grant to fund childhood cancer research. MabVax founder, David Hansen, flew to New York and gave the presentation in Hudson Bay’s office. The charity was tied to a principal of the hedge fund. After the presentation, the investment managers at Hudson Bay immediately approach MabVax with the idea that they could also raise capital through a reverse merger with a public company. Unbeknownst to MabVax that public company was a shell company with no real business that Team Honig already controlled. Hudson Bay said they would be set up the merger with a PIPE investment that gave Hudson Bay discounted stock that can be converted to common stock upon the merger being completed. It also gave the PIPE investors some control over how MabVax could run the company. A PIPE is a private investment in a public entity. MabVax a private company at that time had been dependent on federal grants, private foundation funding and venture capital and wasn’t necessarily looking to go public but they kept the conversation going with Hudson Bay because they wanted the grant that had been offered by a principle of the Hedge Fund, according to the lawsuit.

MabVax never got the grant from the charity. But Hudson Bay did manage to convince MabVax to do a reverse merger with a shell company called Telik. MabVax later learned that a $500,000 grant wouldn’t have been viable because according to public records the charity had less than $450,000 and the largest grant given in the past was round $100,000.

Hudson Bay first proposed a $6 million investment in MabVax, to be made in two tranches of $3 million. The first tranche would be made up-front because MabVax desperately needed financing, with a second tranche of $3 million to come several months later only if MabVax became a public company, according to the lawsuit. MabVax says there was no room to negotiate if they wanted the money they had to go public and Hudson Bay would lead the way in finding the company to do it with.

The biotech company also learned after the merger that Barry Honig had $1 million invested in the original $6 million investment executed by Hudson Bay. The lawsuit says Hudson Bay hid this affiliated party from MabVax and thus it was not disclosed in the public filings asking for shareholders to vote on the merger. If a company is caught lying or misleading investors about affiliated parties in a stock merger it is a clear violation of securities fraud, according the SEC. An example of this kind of self dealing and lying to investors is currently being litigated in Federal court against another hedge fund Hudson Bay and Barry Honig regularly invested with called American Capital Management which is owned by the co-founder of Iroquois Capital Richard Abbe. The lawsuit involves a stock called XpresSpa ($XSPA) has been reported on multiple times by this publication.

It was after the merger that Honig became known to MabVax through making investments in the company via his investment fund GRQ Consultants, Southern Biotech and the Barry and Rene Honig Charitable Foundation. Miami billionaire Philip Frost was also brought in to invest with Honig through his company OPKO Health ($OPKO). Michael Brauser made investments through Grander. Honig’s associate John Stetson made investments through HS Contrarian Investments LLC. Last month the SEC disclosed in their amended complaint that Honig actually owned over 80% of HS Contrarian Investments and said John Stetson was just a front-man for Honig so public companies and the regulator wouldn’t know his true size of stock ownership. The MabVax lawsuit says, in March 2015 Honig assured Philip Frost, Michael Brauser, and John Stetson that MabVax was a “really good opportunity,” and that the group would “make $35 million conservatively in 4 months and our money out [in] 4 weeks.”

Team Honig stands accused on working to get control of the MabVax board and then executing a pump and dump scheme while using the companies cash to pay off other involved in their ring.

All of these men and their related investment companies were charged in the SEC lawsuit and in the recent civil fraud lawsuit by MabVax. There is also a new name, not seen in the SEC lawsuit, tied to John O’Rourke called Airy Properties that MabVax says is part of the Team Honig stock manipulation ring.

Additional stock promoters tied to Honig’s stock manipulation ring
MabVax made a one-two punch with this newest lawsuit because the company also showed evidence of Barry Honig working behind the scenes to force a public company to hire investor relations firms with known questionable tactics among the microcap community. Both firms are Southern California-based. IRTH is run by the Haag brothers, Robert and Andrew, from Santa Monica, California. MabVax says they passed on working with IRTH when Honig first suggested them because they didn’t have a good feeling about them when they met. But when the company needed more money in 2016 and had to go back to Team Honig hiring IRTH was an absolute condition of the financing. Honig said they would have to pay them $300,000.

MabVax remained skeptical of IRTH, and grudgingly acceded to Team Honig’s demands to hire the Haag Brothers, provided they comply with strict rules and were accountable to Company management and not Honig and his associates. The lawsuit says, “As MabVax’s CEO explained in a July 31, 2016 email to IRTH, MabVax wanted “control over . . . what materials are disseminated on our behalf . . . and what is said by those we have hired to represent us.” In particular, MabVax wanted to ensure that IRTH did not leak any non-public information.”

A few months into working with MabVax, IRTH sends a bill for $570,979.13 and MabVax pays it.

Then in December 2016, MabVax received a request for information by the SEC that said there was a non-public investigation and the Company believed the SEC was concerned about conduct by IRTH. So MabVax told IRTH to suspend all work for the Company. Almost immediately thereafter, MabVax says it received loud and vulgar requests by Honig that the Company resume using IRTH. But MabVax revolted against Honig and wouldn’t do it. By February 2017 MabVax officially fired IRTH. The lawsuit says MabVax doesn’t think it got nearly anywhere near $600,000 of services from IRTH for investor relations and public relations work. The company speculates that the money paid to IRTH was actually a back door way for Honig’s to get other people to pay for the work of Honig’s favorite undisclosed promoter John Ford. Ford is Honig’s co-defendant in the SEC lawsuit and has settled with the SEC. The SEC accused Ford of writing false articles on stock websites, like Seeking Alpha, to help Team Honig execute their pump and dump scheme. Ford has been banned from the industry and has to pay a fine and disgorgement for his wrong doings.

IRTH, Robert Haag, and Andrew Haag are all named in MabVax’s recent lawsuit, which has claims of market manipulation, fraud, tortuous interference, and unfair business practices. But the SEC has not come out and directly named IRTH in their complaint against Team Honig.

IRTH is also known for its role in the alleged pump and dump of another Honig led stock scheme called U.S. Gold Corp.

Another familiar name seen in microcap financing deals is Robert Prag. He runs Del Mar Consulting Group that is known as DMCG. MabVax has named Prag as a defendant in their lawsuit for his role in working with Barry Honig. The lawsuit says MabVax was required by Team Honig to give DMCG 500,000 shares of stock for a 2 year contract for investors relations work. Once again this demand was contingent on Honig giving the company more money. At that time the stock would be worth $1 million. DMCG never disclosed in public filings that it was working with Honig, which made it part of a group of affiliates that owned MabVax’s stock. Trading as a group of undisclosed affiliates (called a 13D group because that’s the name of the filing the SEC requires) is an SEC violation at the core of the regulator’s lawsuit against Team Honig. It’s also exactly what this reporter first reported that Team Honig was under investigation for, at trade publication Growth Capitalist, years prior to the SEC bringing an enforcement action.

MabVax claims they issued $22 million in stock to Team Honig and wouldn’t have done it if they knew they were working as a group of undisclosed affiliates. Additionally the original financing had something called blockers in it that didn’t allow one investor to control say over 5 or 10% of the stock. This 13D group consisted of: Barry Honig, John Stetson, Marc Groussman, Robert Prag, Micheal Brauser, John O’Rourke, and Honig’s long time securities deal lawyer Harvey Kesner.

This publication was the first to report that attorney Kesner was removed from the New York Law firm that bore his name Sichenzia, Ross, Ference, Kesner LLP just days before the SEC brought their case against Team Honig.

Kesner and Prag are not named defendants in the SEC lawsuit, although Kesner’s actions are detailed in the complaint as an unnamed lawyer. Kesner has disappeared from the microcap stock scene since the SEC brought their enforcement action but has not been bared as an attorney. It’s unclear if he is a confidential informant for the government or if charges will be brought against him in the future. MabVax also has another lawsuit against Kesner and his old law firm for malpractice for Kesner’s alleged role in helping Honig hide his true disclosure as a group of affiliates trading together to control a stock. Kesner is also accused of providing Honig with advance information of the SEC investigation when he served as MabVax’s counsel. That suit was filed in September 2018 just days after the SEC brought their case. It is being litigated for MabVax by attorney Joel Fleming of Block Leviton LLP. Bill Alpert of Barron’s wrote a well read and detailed story about the lawsuit called “The Lawyer at the Center of the SEC Pump and Dump Case“.

MabVax recently filed for bankruptcy claiming it was the actions of Team Honig that led it to financial ruin. MabVax’s CEO, David Hansen, was not named as a defendant in the SEC enforcement case.

Editors Note: The MabVax lawsuit brought by Baker Botts called Hudson Bay Entity H in the lawsuit and the charity tied to it Charity H. I was able to confirm through a public filing on May 23 2014, the proxy statement, that entity H is Hudson Bay. I also confirmed this through a person familiar with MabVax. The charity name I was not able to determine. This is the first publication to show evidence of Hudson Bay’s alleged role in working with Barry Honig in the MabVax pump and dump scheme. MabVax has since been delisted. Its ticker is $MBVX. Hudson Bay is not a defendant in the SEC lawsuit or the MabVax lawsuit but Yova Roth of Hudson Bay was recently named in a SEC subpoena sent to Michael Brauser’s sons. Yova runs the microcap deals at Hudson Bay.