PITTSFIELD, Mass. — Nuclea Biotechnologies' former chief executive Patrick Muraca is accused of misusing investor funds for his new startup company. The U.S. Attorney's Office and the FBI arrested Muraca on Tuesday morning on a wire fraud charge.
On Monday, the U.S. Securities and Exchange Commission filed a complaint in federal court accusing Muraca of using funds from investors for NanoMolecularDX, a new company Muraca started in Lee, to fund personal expenses, including his fiancée's restaurant business.
"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 biopharmaceutical 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 fiancée's restaurant business.
"From April 2016 to the present, Muraca has spent at least $400,000 of investor funds for purposes unrelated to the pharmaceutical development businesses of Nano and Metabo. Muraca has diverted investor money from the Nano and Metabo bank accounts, as well as investor money that was deposited to Muraca's personal bank account."
The court agreed to freeze Muraca's assets.
"As alleged in our complaint, we're intervening to protect investors because Muraca has veered from his stated intentions and has been using their money for purposes other than the fight against cancer and other diseases," said Paul Levenson, director of the SEC's Boston regional office, in a statement released on Monday.
The U.S. Attorney's Office for the Southern District of New York also filed criminal charges relating to the case on Tuesday.
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, allege that Muraca engaged in wire fraud. Muraca was arrested Tuesday morning and expected to be arraigned in federal court in Springfield. The charges are related to the SEC's claims of defrauding investors.
Kim said, "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."
The single count of wire fraud carries a maximum sentence of 20 years.
Tuesday afternoon, Muraca's attorney Anthony Doyle released a statement saying he is reviewing the case and is "confident" that a "very different set of facts will emerge."
"The charges brought against Patrick Muraca by the Securities and Exchange Commission and the U.S. Attorney's Office for the Southern District of New York are serious and we are responding accordingly. We are reviewing the complaint brought by the Securities and Exchange Commission and feel confident that when we have the opportunity to present our case that a very different set of facts will emerge," Doyle wrote.
"Mr. Muraca takes his fiduciary responsibilities seriously and we look forward to the swift resolution of this matter. Until we have more information about both the criminal charges filed in New York and the complaint filed by the Securities and Exchange Commission, we will reserve further comment."
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.
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.
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Miss Hall's School Graduates 60 Students
PITTSFIELD, Mass. — Sixty students, including sixteen from Berkshire County and nearby communities, graduated on Sunday, May 31, during Miss Hall’s School's 2020 graduation.
Because of the COVID-19 pandemic, the program this year was held online, with students and their families from around the globe joining via Zoom. The event, which was also live-streamed, included remarks from Board of Trustees President Nancy Gustafson Ault, MHS Class of 1973; Head of School Julia Heaton; Senior Class President Ria Kedia of Pittsfield; and School President Ayla Wallace of York, Pa. Actress Jayne Atkinson, selected by the class as its speaker, sent special words of wisdom to the seniors.
Among the Class of 2020 graduates are the following local students: Ella Biancolo of Pittsfield; Emily Carmel of Pittsfield; Hannah Chrzanowski of Dalton; Maya Creamer, of Pittsfield; Angela Guachione of Pittsfield; Meredith Hall of Adams; Olivia Irion of Washington; Ria Kedia of Pittsfield; Lanna Knoll of Great Barrington; Emma Kotelnicki of Dalton; Isabelle Lapierre of Dalton; Soleil Laurin of Pittsfield; Jenna Maces of Pittsfield; Téa Mazzeo of Pittsfield; Kathryn Sirois of Stockbridge; and Charlotte Smith of New Marlborough.
The following awards were also bestowed on members of the Class of 2020:
• Joseph F. Buerger Memorial School Spirit Cup: Emily Carmel of Pittsfield
• Margaret Witherspoon Award: Ayla Wallace of York, Pa.
• Christine Fuller Holland ’33 Service Prize: Bingqi Wang of Jinan, Shandong, China
Mary Hines, president of the Pittsfield High School class of 2020, will speak at the PHS' virtual graduation ceremony on Sunday, June 7. The event will be aired by Pittsfield Community Television at 1 p.m. click for more
Persip said he did not have an issue removing the City Council oversight but wanted some public process instituted. He said he wanted to be sure people knew about the fines if they were to change.
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