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Muraca Indicted On Fraud Charges

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PITTSFIELD, Mass. — A grand jury has indicted Patrick Muraca on wire fraud and making false statements to authorities.
Muraca, the former head of Nuclea Biotechnologies, had previously been charged by U.S. Attorney's Office for allegedly misusing investor funds. He was arrested in August on the charge. 
"Patrick Muraca promised investors their money would be used to expand his businesses, but as alleged, he instead used those funds to line his pockets. Thanks to the investigative work of the FBI, Muraca must now answer for his fraud," wrote Joon Kim, acting U.S. Attorney for the Southern District of New York, and William Sweeney Jr., assistant director of the New York field office of the Federal Bureau of Investigation at the time of his arrest.
Muraca is facing similar charges from U.S. Securities and Exchange Commission, who alleged that Muraca was collecting funds to start NanoMolecular DX but instead using investor money on personal expenses.
"Muraca has raised at least $1,175,000 from at least 15 investors for purported investment in Nano and Metabo, which he describes as pharmaceutical development companies. Muraca represented to investors that their funds would be used to manufacture and commercialize cancer diagnostic tests and other pharmaceutical innovations, to purchase assets related to such products, and to develop clinical trials," reads the SEC filing. 
"In actuality, Muraca diverted a substantial portion of the money raised from investors to his own personal use. In some instances, Muraca caused investors to deposit funds directly into Muraca's personal bank account. In other instances, Muraca removed investor funds from the business bank accounts of Nano and Metabo, transferring the funds to his personal accounts or directly paying personal expenses from the business accounts. Muraca has been misappropriating investors' money in order, among other things, to pay for routine groceries, restaurants, entertainment, and to subsidize his finance's restaurant business."
Now, several months later, a grand jury in Southern District of New York had brought forth indictments against Muraca. 
"Muraca defrauded investors in two companies he founded and controlled by soliciting investments purportedly to expand the companies' businesses, and then misappropriating the invested funds for personal use," the indictment reads.
Further, Muraca is accused of lying to authorities in November when he allegedly said he did not offer to buy the property in which his fiancee ran a restaurant. Authorities say he did offer $220,000 for it in January.
On Dec. 7, Muraca entered not guilty pleas on the indictment. He was released on $100,000 surety -- putting two Corvettes he owns up for the bond.
The 48-year-old Muraca lives in Pittsfield and was most known for founding Nuclea Biotechnologies. Muraca left Nuclea in 2015 but remained a shareholder. That is when he first started to open NanoDX, which was tied in with the Start Up New York program in Albany. But that didn't take off.
In August 2016, Nuclea filed for bankruptcy. The company had been highly touted when it was running in Pittsfield, with the governor visiting and praising the work it was doing.
But, by 2016, the company shut down its Pittsfield operations and left unpaid bills in its wake. Through the bankruptcy proceedings, Muraca purchased the assets of Nuclea for $330,000 for his new company NanoMolecularDX in Lee and it was seen as a restart to what was left behind when he left Nuclea. 
The companies were touted as doing research and development for cancer diagnostics. Muraca was the president and CEO of NanoMolecular DC and MetaboRX,  the two companies he founded in the post-Nuclea era. 
The SEC says in April 2016, Muraca had begun soliciting investors for the two companies and continued until as recently as the end of June. According to the complaint, "at least fifteen individuals invested in Nano and Metabo between April 2016 and the present and Muraca provided many of these individuals with investment confirmations listing the number of shares in each company that they were entitled to as a result of their investment."
The investors came from all over the country, including New York City, New Jersey, Pennsylvania, Nevada, Arizona, and the state of Florida. 
"On various occasions between 2016 and 2017, Muraca represented to shareholders of Nano and Metabo and prospective investors in each company that their funds would be used for pharmaceutical development and commercialization. He repeatedly sent shareholder updates and solicitations detailing the purported pharmaceutical business operations," the complaint reads. 
"In these updates, Muraca described in detail the purported uses to which investor proceeds were being applied in connection with the pharmaceutical business. In making such representations, Muraca omitted to disclose to his investors that their funds had been used, and would be used on an ongoing basis, to pay his personal expenses and to fund business activities unrelated to pharmaceutical development, such as his fiancée's restaurant business," the complaint reads. 
On March 31, 2017, Muraca allegedly filed an application as a foreign LLC, or limited liability corporation, for Nano stating that the business's purpose was "serving food, restaurant." On April 24, 2017 Muraca allegedly emailed investors saying the MetaboRX "is a preclinical stage biopharmaceuticals enterprise based on pioneering research in fatty acid metabolism" and that the company "has made major strides in the development of new diagnostics and is starting to build real value for our shareholders."
But, that email fails to mention the registration of a business with the purpose of "serving food; restaurant," the SEC alleges. On June 30, 2017, Muraca continued to solicit investments in his companies and an individual invested $80,000 into the Nano bank account, the complaint reads.
"In his various oral and written representations to investors and prospective investors, or in any other communications with investors or prospective investors, Muraca omitted to disclose that their investments had been, and on an ongoing basis would be, used to pay for his own personal expenses, to pay for a food service or restaurant business, or to fund businesses related to Nano or Metabo's purported pharmaceutical development activities," the complaint reads.
The SEC says Muraca instructed some investors to wire more than $65,000 into his personal bank account and then used those funds for personal expenses such as "his mortgage and expenses for family members and his fiancée."
"Muraca repeatedly took money from those accounts, writing checks payable to himself and to friends and family, and paying his personal expenses, such as grocery store purchases, a luxury goods purchase, and automotive shop purchases, with debit cards for the business accounts; and, Muraca used at least $65,000 of investor funds from the Nano and Metabo business bank accounts to directly pay for expenses related to his fiancée's restaurant businesses," the complaint reads.
Muraca is accused of not only funding his fiancée's business and personal expenses, but also payments to a casino. The SEC complaints tracks the accounts, deposits and withdrawals, over several months.
By January, one account was overdrawn and Muraca sought out more investments. Shortly after receiving more funds, Muraca allegedly continued to write checks to himself, his mother, and for his fiancée's restaurant.
"Muraca engaged in a similar pattern with respect to the Metabo bank account, which was opened in January of 2017 with a $10 balance. On Jan. 25, 2017, Investor #6 wired $50,000 to the Metabo bank account. On January 26 and 27, 2016, Investor #7 wired $50,000 to the Metabo bank account. There were no other credits to the Metabo bank account. Of the $100,000 in investor funds deposited into the Metabo bank account on or about those dates, Muraca transferred over $22,000 to himself via checks from the account payable to 'Patrick Muraca,' and spent over $29,000 directly from the Metabo bank account for personal expenses, including a $15,000 security deposit for a lease to the premises of his fiancée's new restaurant," the complaint reads.
Muraca's fiancée was the owner of a restaurant in Lee and the SEC says more than $45,000 of investor money from the two accounts went to support it. The restaurant closed on Jan. 29 and investor funds were allegedly used to start up another restaurant in Lenox. 
"In January 2017, Muraca and his fiancée signed a three-year lease agreement for a restaurant location in Lenox, which required a $15,000 security deposit and called for $2,000 per month rent. On March 31, 2017, Muraca paid $15,000 directly out of the Metabo bank account to the landlord of the Lenox restaurant. Muraca then wrote a check for $2,000 from the Metabo bank account for the April 2017 rent at the location," the complaint reads.

Tags: fraud,   indictment,   SEC,   

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