Galena Executives Face Investigation into "Pump and Dump" Scheme
On August 5, 2015, the U.S. District Court for the District of Oregon denied motions to dismiss securities class action claims against Galena Biopharma, Inc. (NASDAQ: GALE) and certain of its directors. The class actions allege that the individual defendants had facilitated a “pump and dump” scheme to artificially inflate Galena’s stock price, and during an eighteen day trading period while the stock price was inflated, sold massive amounts of their personally-held shares.
Specifically, the class actions allege that in July 2013, the individual defendants hired stock promotion firms, the DreamTeam Group and Lidingo Holdings, LLC to initiate a misleading marketing campaign to artificially boost Galena’s stock price. The two firms then published a series of “articles,” which promoted Galena’s stock on investor websites under multiple aliases. These “articles” never disclosed that Galena (under the individual defendants’ direction) paid for the authors to write the articles or had approved every article before its publication.
When news of the scheme began to leak out, Galena’s share price plummeted and the SEC announced that it was investigating Galena’s relationship with the DreamTeam.
In upholding claims against certain of Galena’s directors, the Court found that the amount and timing of these defendants’ stock sales were dramatically out-of-line with their prior trading practices and weighed heavily in support of an inference of fraudulent intent.
Shareholder rights law firm Schubert Jonckheer & Kolbe LLP is investigating whether derivative claims on behalf of Galena may be warranted. Through a derivative action, Galena may seek to be repaid for its losses due to having to defend the class actions and pay any damages assessed, as well as for its costs incurred in responding to the SEC’s investigation.
If you currently own Galena stock and wish to obtain additional information about the investigation and your legal rights, please fill out our form (at right) or contact Miranda Kolbe either via email at mkolbe@schubertlawfirm.com or by phone at 415-788-4220.
