According to a whistleblower complaint, in September 2018, Michael Mullen of National Securities Corporation (NSC) allegedly engaged in insider trading of stocks of TG Therapeutics—a subsidiary of NSC’s parent company Fortress Biotech, Inc—days before the biopharmaceutical company announced the disappointing results of their clinical trials for “U2,” a potential treatment for chronic lymphocytic leukemia.
According to the complaint filed on behalf of former NSC compliance officer Kay Johnson:
In September 2018, [CEO and Chairman of National Holdings Corporation Michael Mullen] engaged in insider trading of Fortress subsidiary TG Therapeutics Inc. (“TG Therapeutics’)–managed and directed by Defendants Michael Weiss, Daniel Hume, and Neil Herskowitz, among others–before it announced disappointing clinical results. When TG Therapeutics announced those results on September 25, 2018, its stock dropped 44%. But on a day that TG Therapeutics lost nearly half its value, Defendant Mullen sold put options he had purchased twelve days earlier–and more than doubled his money. Several of National’s directors and officers facilitated and attempted to cover up Mullen’s insider trading.
Not only did Mr. Mullen allegedly benefit from TG Therapeutics’ tumbling stock price, but National also dragged their own firm’s clients into the mess, selling them shares of TG Therapeutics (TGTX) in the weeks leading up to the announcement that the once-promising clinical trial for “U2” was not moving forward.
The complaint further states:
[U]pon information and belief, at Fortress’s direction, National had aggressively marketed and sold TGTX to NSC’s own customers.” Mullen was the managing director of Opus National Private Client Group (“Opus Private”) … Between September 13 and 24, Opus Private accounts sold another 152,545 shares of TGTX, including 100,000 shares from a single account on September 17.
Mullen’s close friend David Claps even sold TGTX shares to his own clients. The complaint goes on to state, “On September 24, 2018, Mr. Claps even let three of his own clients buy a total of 1,225 TGTX shares. The very next day, TG Therapeutics announced the disappointing clinical results, and TGTX dropped 44%.
Michael Mullen considered his colleague Kay Johnson to be invaluable to the company’s success—that is until she began investigating these claims of insider trading. Days before the deadlines for filing a report with FINRA, she was allegedly terminated.
When powerful financial services professionals believe they can flout securities laws and cultivate a culture of hostility and secrecy, clients are harmed. According to a Reuters special report published on August 2, 2018, 35% of NSC brokers have FINRA disclosures. According to the firm’s BrokerCheck report, the company has 79 disclosures. Although no disclosures have been filed since 2015, this track record is concerning.
NSC often recommends stocks from biotech companies owned by their parent company, Fortress. They have recommended stocks from companies like Mustang Bio, Inc (MBIO.O), Avenue Therapeutics, Inc (ATXLO), and Checkpoint Therapeutics Inc (CKPT.O), only for those stocks to underperform, sometimes significantly. Although biotechnology stocks are notoriously risky and National maintains that they have always informed investors about their stake in some of their investment products, this unique arrangement continues to put investors at risk.
If you held or currently hold accounts with National Securities Corporation or any of its subsidiaries, including Opus Private, and you believe you may have been a victim of Michael Mullen’s alleged insider trading, don’t delay in contacting securities attorneys who are eager to help you. Call Marc Fitapelli or Jonathan Kurta of Fitapelli Kurta at (877) 238-4175.