SEC Charges Kiromic BioPharma and Two Former C-Suite Executives with Misleading Investors about Status of FDA Reviews

The Securities and Exchange Commission today filed settled charges against Houston-based biotherapeutics company Kiromic BioPharma, Inc., its former CEO, Maurizio Chiriva-Internati, and its former chief financial officer, Tony Tontat, for failing to disclose material information about Kiromic’s two cancer fighting drug candidates before, during, and after a July 2021 follow-on public offering that raised $40 million. Kiromic and Tontat have agreed to settle the SEC’s charges in separate administrative proceedings and Chiriva has agreed to settle the charges in federal district court. Kiromic was not ordered to pay a civil penalty in light of its self-reporting, cooperation, and remediation, and Chiriva and Tontat agreed to pay civil penalties of $125,000 and $20,000, respectively, to settle the SEC’s charges. “These resolutions strike the right balance between holding Kiromic’s then-two most senior officers responsible for Kiromic’s disclosure failures while also crediting Kiromic for its voluntary self-report, remediation, proactively instituting remedial measures, and providing meaningful cooperation to the staff,” said Eric Werner, Director of the SEC’s Fort Worth Regional Office. According to the SEC’s order against Kiromic, the company raised $40 million in a public offering on July 2, 2021, for the purpose of funding the prospective clinical trials for its two cancer fighting drug candidates, the ALEXIS-PRO-1 and the ALEXIS-ISO-1. However, the SEC’s order found that two weeks before the public offering, the Food and Drug Administration (FDA) notified Kiromic that it had placed the drug candidates on clinical hold—an FDA order to delay the proposed clinical investigations. The SEC’s order also found that Kiromic did not disclose the FDA clinical holds in its SEC filings, investor roadshow calls, or during due diligence calls leading up to the offering, despite the fact that Kiromic disclosed the hypothetical risk of a clinical hold and the potential negative consequences on Kiromic’s business. Without admitting or denying the SEC’s findings, Kiromic consented to the SEC’s order, which requires Kiromic to cease and desist from committing or causing future violations of the antifraud, reporting, and disclosure controls provisions of the federal securities laws. The SEC’s complaint against Chiriva, filed in the U.S. District Court for the Southern District of Texas, alleges that Chiriva learned about the FDA clinical holds for the ALEXIS-PRO-1 and the ALEXIS-ISO-1 on June 16 and 17, 2021, respectively. The complaint alleges that Chiriva reviewed, signed, and contributed content to a report filed with the SEC on June 25, 2021, and signed and certified another report filed with the SEC on August 13, 2021, both of which failed to disclose the FDA clinical holds. The complaint also alleges that three days before Kiromic’s offering, Chiriva participated in roadshow calls with investors and did not correct misstatements by another Kiromic officer about the status of the FDA review by disclosing the FDA’s clinical holds. Without admitting or denying the SEC’s allegations, Chiriva has agreed to settle the SEC’s charges by consenting to be permanently enjoined from violating the antifraud, reporting, certification, and disclosure controls provisions of the federal securities laws, to be barred for three years from serving as an officer or director of a public company, and to the civil penalty referenced above. The settlement is subject to court approval. According to the SEC’s order against Tontat, after the July 2021 public offering, Tontat received and reviewed detailed letters from the FDA explaining the FDA’s decision for issuing the June 16 and 17, 2021 clinical holds. The order also found that, despite acknowledging that the FDA communications were material and warranted disclosure, Tontat signed and certified Kiromic’s August 13, 2021, Form 10-Q that failed to disclose the clinical holds. Without admitting or denying the SEC’s findings, Tontat consented to the SEC’s order, which requires him to cease and desist from committing or causing future violations of the reporting and certification provisions of the federal securities laws and orders him to pay the civil penalty referenced above. The SEC’s investigation was conducted by Kendrack Lewis of the SEC’s Fort Worth Regional Office, under the supervision of Samantha S. Martin and B. David Fraser. The SEC’s litigation will be led by Jennifer Reece and supervised by Keefe Bernstein.

The Securities and Exchange Commission today filed settled charges against Houston-based biotherapeutics company Kiromic BioPharma, Inc., its former CEO, Maurizio Chiriva-Internati, and its former chief financial officer, Tony Tontat, for failing to disclose material information about Kiromic’s two cancer fighting drug candidates before, during, and after a July 2021 follow-on public offering that raised $40 million. Kiromic and Tontat have agreed to settle the SEC’s charges in separate administrative proceedings and Chiriva has agreed to settle the charges in federal district court. Kiromic was not ordered to pay a civil penalty in light of its self-reporting, cooperation, and remediation, and Chiriva and Tontat agreed to pay civil penalties of $125,000 and $20,000, respectively, to settle the SEC’s charges. “These resolutions strike the right balance between holding Kiromic’s then-two most senior officers responsible for Kiromic’s disclosure failures while also crediting Kiromic for its voluntary self-report, remediation, proactively instituting remedial measures, and providing meaningful cooperation to the staff,” said Eric Werner, Director of the SEC’s Fort Worth Regional Office. According to the SEC’s order against Kiromic, the company raised $40 million in a public offering on July 2, 2021, for the purpose of funding the prospective clinical trials for its two cancer fighting drug candidates, the ALEXIS-PRO-1 and the ALEXIS-ISO-1. However, the SEC’s order found that two weeks before the public offering, the Food and Drug Administration (FDA) notified Kiromic that it had placed the drug candidates on clinical hold—an FDA order to delay the proposed clinical investigations. The SEC’s order also found that Kiromic did not disclose the FDA clinical holds in its SEC filings, investor roadshow calls, or during due diligence calls leading up to the offering, despite the fact that Kiromic disclosed the hypothetical risk of a clinical hold and the potential negative consequences on Kiromic’s business. Without admitting or denying the SEC’s findings, Kiromic consented to the SEC’s order, which requires Kiromic to cease and desist from committing or causing future violations of the antifraud, reporting, and disclosure controls provisions of the federal securities laws. The SEC’s complaint against Chiriva, filed in the U.S. District Court for the Southern District of Texas, alleges that Chiriva learned about the FDA clinical holds for the ALEXIS-PRO-1 and the ALEXIS-ISO-1 on June 16 and 17, 2021, respectively. The complaint alleges that Chiriva reviewed, signed, and contributed content to a report filed with the SEC on June 25, 2021, and signed and certified another report filed with the SEC on August 13, 2021, both of which failed to disclose the FDA clinical holds. The complaint also alleges that three days before Kiromic’s offering, Chiriva participated in roadshow calls with investors and did not correct misstatements by another Kiromic officer about the status of the FDA review by disclosing the FDA’s clinical holds. Without admitting or denying the SEC’s allegations, Chiriva has agreed to settle the SEC’s charges by consenting to be permanently enjoined from violating the antifraud, reporting, certification, and disclosure controls provisions of the federal securities laws, to be barred for three years from serving as an officer or director of a public company, and to the civil penalty referenced above. The settlement is subject to court approval. According to the SEC’s order against Tontat, after the July 2021 public offering, Tontat received and reviewed detailed letters from the FDA explaining the FDA’s decision for issuing the June 16 and 17, 2021 clinical holds. The order also found that, despite acknowledging that the FDA communications were material and warranted disclosure, Tontat signed and certified Kiromic’s August 13, 2021, Form 10-Q that failed to disclose the clinical holds. Without admitting or denying the SEC’s findings, Tontat consented to the SEC’s order, which requires him to cease and desist from committing or causing future violations of the reporting and certification provisions of the federal securities laws and orders him to pay the civil penalty referenced above. The SEC’s investigation was conducted by Kendrack Lewis of the SEC’s Fort Worth Regional Office, under the supervision of Samantha S. Martin and B. David Fraser. The SEC’s litigation will be led by Jennifer Reece and supervised by Keefe Bernstein.