Vector’s largest shareholder, Phillip Frost, charged with securities fraud

Frost owns more than 15% of Douglas Elliman’s parent company’s stock

Sep.September 07, 2018 06:35 PM

Phillip Frost and Opko Health Building 4400 Biscayne Boulevard

Phillip Frost, the largest shareholder of Douglas Elliman’s parent company, was charged Friday by the Securities and Exchange Commission with multiple counts of securities fraud.

Frost, a Miami billionaire who owns more than 15 percent of Vector Group’s stock, was charged by the SEC in a federal district court in Manhattan for his role in an alleged penny stock fraud scheme. Frost, who is the chairman and CEO of the Miami biotech company Opko Health, is alleged to have participated in a pump-and-dump scheme that the SEC claims caused significant harm to investors and generated $27 million in illegal stock sales.

Frost was allegedly tied to Boca Raton businessman Barry Honig, who orchestrated the acquisition of large amounts of microcap stocks at steep discounts, according to the SEC’s complaint. Then, after gaining substantial ownership interest in the companies, Honig and his associates allegedly engaged in “illegal promotional activity and manipulative trading to artificially boost each issuer’s stock price.”

Honig and his associates would allegedly then dump their shares into the market, reaping millions of dollars at the expense of unsuspecting investors, according to the SEC. The securities regulator claims Honig coordinated with Frost and others on many of these schemes.

Frost is a major philanthropist in Miami and helped fund the Phillip and Patricia Frost Museum of Science. He also owns a massive, 6-acre estate on Star Island in Miami Beach, which includes a 31,615-square foot home he built in 2001. The assessed value is $42.6 million, Miami-Dade property records show, likely making it one of the most expensive properties in Miami.

He owns 20.5 million shares or 15.3 percent of Vector Group’s stock, making him the single largest shareholder of the company, according to Vector Group’s most recent proxy statement filed with the SEC on March 12.

Vector Group and Opko Health also share the same address, 4400 Biscayne Boulevard in Miami. The securities filing shows that Vector entered into an office lease with a company affiliated with Frost in 2012. The lease is for 12,390 square feet of space.

Vector Group has had stakes in some of Frost’s other companies, including Ladenburg Thalmann Financial Services and Opko Health, according to the company’s most recent annual report.

In total, the Securities and Exchange Commission charged a group of 10 individuals and 10 associated entities for their participation in the alleged fraud.

Vector Group is a publicly traded holding company headed by Howard Lorber and Bennett LeBow. Its holdings include tobacco and real estate investments. Through its subsidiary New Valley LLC it owns about a 70 percent stake in Douglas Elliman, where Lorber serves as chairman. A spokesperson for Vector did not immediately respond to a request for comment.

Ina Cordle contributed reporting.

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