SEC Charges Long Island Recidivist with Running Offering Fraud
The Securities and Exchange Commission has charged recidivist securities law violator Donald A. Milne III of Merrick, New York and his company Instaprin Pharmaceuticals with operating an offering fraud that raised more than $4 million from more than 70 investors, many of them elderly.
The Securities and Exchange Commission has charged recidivist securities law violator Donald A. Milne III of Merrick, New York and his company Instaprin Pharmaceuticals with operating an offering fraud that raised more than $4 million from more than 70 investors, many of them elderly.
The SEC’s complaint alleges that Milne falsely told investors that their money would be used to pay for the operating expenses of Instaprin Pharmaceuticals, which was purportedly developing a revolutionary fast-acting aspirin to instantly stop heart attacks and strokes.
Instead, Milne allegedly used investors’ money to pay for personal expenses, such as a vacation, clothing, spa treatments, divorce expenses, and on Island Raceway & Hobby Inc., his now-defunct remote-controlled toy racecar business, which had previously operated in Lindenhurst, New York.
In addition to misrepresenting the intended use of investor proceeds, the SEC claims that Milne falsely stated in offering documents that he held 16 patents, including some in the pharmaceutical field; he had assembled a board of directors and advisory committees that included world-renowned industry leaders; and Instaprin had millions of dollars in working capital and had made significant steps towards developing a marketable product.
In reality, according to the complaint, he held only three patents, none of which related to pharmaceuticals; many industry leaders listed in the offering documents never served on Instaprin’s board or advisory committees; and Instaprin had only a fraction of the alleged millions of dollars in working capital, which it raised under false pretenses. Milne also omitted from the offering documents any mention of his criminal past.
“Although Milne portrayed himself as an experienced professional in the pharmaceutical industry who was on the cusp of turning his investors’ investments into riches,” the SEC’s complaint stated. “He was, in reality, a convicted felon who preyed on and defrauded unsuspecting investors.”
In 1998, Milne pleaded guilty to conspiracy to commit securities fraud. During a stint as a broker in a New York boiler room, he was accused of accepting bribes and kickbacks in exchange for recommending fraudulently-issued stock in one of two telephone companies to unsuspecting brokerage customers. In 2000, he was sentenced to three years probation, fined, and ordered to pay restitution to his victims.
Without admitting or denying the allegations in the complaint, Milne and Instaprin have consented to the entry of final judgments permanently enjoining them from violating the charged provisions of the federal securities laws, ordering full disgorgement and prejudgment interest of $3.6 million and imposing civil penalties of $554,301 and $2.8 million, respectively.
The SEC’s complaint also names Island Raceway as a relief defendant. Island Raceway has consented to the entry of a final judgment agreeing to pay $941,100 in disgorgement and prejudgment interest. The settlement is subject to court approval.
