SEC charges BioDefense Corp. with fraud
Federal investigators accused BioDefense Corp., along with several of its key executives, of misleading investigators as it collected $26 million in funding, according to the Boston Globe.
In court documents, the SEC said that BioDefense Corp. falsely told investors that the company was paying employees very little in cash, but was instead offering them "sweat equity" shares that could become valuable should the company go public or become profitable.
The company's largest expense, according to the SEC, was its payments to employees, which in 2004 totaled $1 million. A large percent of the company's money was also going to pay sales firms that were selling securities to overseas investors, the Boston Globe reports.
Founder of BioDefense Corp. and a former chief executive Michael Lu was also charged in the case, as were a former senior executive vice president, a former vice president and a consultant.
The company's major technological platform is known as the MailDefender. The system uses microwaves, ultraviolet light and infrared energy to kill or damage pathogenic agents.