5 p.m., Aug. 25
Carlsbad Broker Nailed for Hyping Biotech Stock
On Jan. 31, a federal court in Illinois entered a default judgment against Daniel J. Burns of Carlsbad. He is to pay $1.1 million in disgorgement and interest. According to the Securities and Exchange Commission, Burns was paid for manipulating shares of CytoCore, a biotech formerly based in San Diego, now based in Chicago. The SEC charged that Burns raked in thousands of dollars in improper compensation from the company as he cooked up schemes to profit from CytoCore stock. Burns had been chairman of the company.
In February of 2008, according to the SEC, Burns caused the company to issue a press release touting his investment in CytoCore stock. Immediately, he began dumping the stock — secretly. This was also insider trading, says the commission, because he had inside information on company activities. The stock shot up during the period Burns was manipulating it. He improperly received compensation when he was an unregistered broker soliciting investors in CytoCore stock.
According to the SEC, Burns submitted false claims for commissions that were purportedly earned by a friend, who kicked back the commissions to Burns.
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