A Greek Orthodox priest who also manages a hedge fund faces a lifetime ban from working as an investment advisor and has been penalized $160,000 for making false statements about a biotech company while betting against its stock.
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Early Wednesday, U.S. District Judge Patti Saris declined to force Rev. Emmanuel Lemelson and his investment firm Lemelson Capital Management to pay the $2.21 million the U.S. Securities and Exchange Commission sought after a jury found him liable for making false statements.
In that November verdict, jurors rejected the SEC’s main argument that Lemelson carried out a “short and distort” by manipulating Ligand Pharmaceuticals Inc’s stock through lies after shorting it.
Jurors did ultimately find Lemelson liable for making three false, material statements throughout the course of his shorting scheme. Short-sellers profit when a stock price declines, and the fund he managed, The Amvona Fund, made $1.3 million as a result of these types of declines.
Saris held Lemelson responsible for a “particularly egregious” false claim during a radio interview that Ligand’s flagship hepatitis C drug was “literally going to go away” and that company representatives “basically agreed with him.”
While Judge Saris did not endorse the SEC’s proposed amount in penalties and disgorged profits, she did conclude that his conduct sufficiently merited a five-year injunction barring him from further securities activities.
Lemelson’s lawyers argued against such an order, claiming an injunction of any length would allow the SEC to justify imposing a lifetime ban on him serving as an investment advisor.
However, Judge Saris claimed a temporary injunction was warranted as Lemelson “continues to unabashedly defend his actions” and that “he has not learned his lesson.”
Lemelson’s lawyers say he plans to appeal the verdict and claim he made the statements at issue in good faith, noting his investment philosophy is closely based on Christian ethics. They also described the lawsuit filed by the SEC in 2018 as “an effort to squash him,” stating the agency only opened the case after then-Representative Duncan Hunter, who represented Ligand’s California district, wrote a letter recommending an investigation.
“I spoke the truth about Ligand Pharmaceuticals,” Lemelson stated during a February hearing.
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