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King of Biotech Sentenced to 4 Years Jail for Stock Fraud

BY: Josh Ferguson | Category: Industry-News | Submitted: 2013-05-13 09:32:44
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Article Summary: "On the 2nd of May 2013, a federal judge sentenced David Blech to 4 years prison for stock manipulation. If the name seems familiar, it's because Blech was once called the 'King of Biotech' and was potentially one of the fathers (financial fathers) of the entire biotech industry..."

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The biotech industry is one that continues to grow as more and more investors begin to realise its staggering potentials. In 2012, the biotech industry as a whole made an estimated $5.2 billion dollars, which was a 37 percent increase to previous years.

As since the dawn of time, there will always be someone who will endeavour to find a way to make money quick, to milk the system, to lie cheat and swindle. Sadly, biotech too has felt the effects of such malcontents.

On the 2nd of May 2013, a federal judge sentenced David Blech to 4 years prison for stock manipulation. If the name seems familiar, it's because Blech was once called the "King of Biotech" and was potentially one of the fathers (financial fathers) of the entire biotech industry.

His work in the biotech industry began with his founding of the Genetic Systems Corporation, which was responsible for developing the first anti-body based rapid diagnostic tests for sexually-transmitted diseases. However his real coup would be the foundation of Icos Corporation, which developed the block buster drug Cialis, which was then bought out by pharmaceutical giant Eli Lilly for a record breaking 2.6 billion dollars, not bad for an initial investment of 33 million. He was also in on the ground floor for the formation of the Celgene Corporation, which is now the 5th largest biotech company in the world, with a current value of 35 billion dollars. In 1992, Belch even made it on to the Forbes 400 (a list detailing the 400 wealthiest individuals in America) with a personal fortune of over 300 million dollars. On the surface, it can be seen how he earned his seemingly apt moniker of "King of Biotech".

This king however had a dark side. After the collapse of his company, D. Blech and Co. due to the decline in the value of technology shares, he started to seek other ways to maintain his position on the top of the biotech pile. In 2006 he reached out to friends and relatives to fund investments, amassing over a million dollars. With this, he attempted to manipulate the share price of Pluristem Therapeutics Inc. (which is developing clinical applications for adult stem cells). How he did this was to buy large amounts of the shares via accounts held in other peoples names, prompting a rise in the share price, before selling of these shares, along with his personal shares, netting $1.2 million for himself. He used similar shady practices for personal gain using a company he personally founded, Intellect Neurosciences.

What makes this offense particularly heinous, is the fact this marks the third time he has committed such an offense, starting as early as 1998. Following a trial where he pleaded guilty and was sentenced 5 years probation, duration where he assiduously stayed within the letter of the law, before diving right back into the grey world of insider trading. The U.S District Judge Collen McMahon presiding over the case was disgusted with the actions of "King" David Blech, going as far to call him a "serial stock manipulator" and denying his lawyers pleas for mercy with a chilling "No mercy. This time, punishment" brushing aside an attempt by Blech to explain away his transgressions as due to bi-polar disorder and a gambling addiction. He claimed he had been led to crime due to mounting debt and was making an "effort to control my addictive behaviour". After sentencing Blech is left with no assets and a approximate 9 million dollar debt and faces an additional civil lawsuit.

This shocking reversal of fortune is a stark reminder that the biotech industry is not immune to the pitfalls and threats that any large industry faces. Actions undertaken by Blech and perhaps others in the financial sector threaten to undermine the legitimacy and future successes of the entire biotech community. While the basis of the community may be research and pushing the boundaries of human knowledge, the money for such endeavours must come from somewhere and once that money starts coming from sources like the open stock market, a degree of trust must be placed in individuals akin to Blech. Men and women who understand the financial markets and the games that seem to be played on wall street. One can only hope that they are more trustworthy than the one time "King of Biotech"

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Comments on this article: (1 comments so far)

Comment By Comment
2013-05-13 09:53:19 628
David Blech has been a valuable asset of the biotechnology industry. Of course he has made some bad and shameful choices in life. I have seen this guy and with his potential, once he gets released from jail I really hope he returns back to the biotech industry and work honestly after that. Long live King !!

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