Securities – Misstatement liability – Scheme liability

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Where the Securities and Exchange Commission has alleged that three defendants committed securities fraud in their efforts to bring a new drug to market despite negative feedback from the Food and Drug Administration, the SEC has plausibly alleged misstatement liability by one of the defendants and scheme liability by two of them but has failed to plausibly allege scheme liability by the third defendant.

“The Securities and Exchange Commission (the ‘SEC’) alleges that Stefano R. Carchedi, Marie L. Foegh Ramwell, and James G. Cullem (‘Defendants’) committed securities fraud in their efforts to bring a new drug to market despite negative feedback from the Food and Drug Administration (the ‘FDA’). Now before the Court are Defendants’ motions to dismiss the SEC’s complaint. After hearing, the Court concludes that the SEC has plausibly alleged misstatement liability by Carchedi and scheme liability by Carchedi and Cullem but has failed to plausibly allege scheme liability by Foegh. …

“The SEC alleges liability under two theories. First, the SEC claims that Carchedi is liable under SEC Rule 10b-5(b), see 17 C.F.R. §240.10b-5(b), and §17(a)(2) of the Securities Act of 1933, see 15 U.S.C. §77q(a)(2), for making misleading statements. Second, the SEC claims that all three Defendants are subject to scheme liability under Rule 10b-5(a) and (c), see 17 C.F.R. §240.10b-5(a), (c), and §17(a)(1) and (3) of the Securities Act of 1933, see 15 U.S.C. §77q(a)(1), (3), based on their allegedly fraudulent conduct. …

“Contrary to Carchedi’s argument, the SEC has alleged ample and particular facts supporting a plausible inference of scienter. …

“The Court thus concludes that the SEC has plausibly alleged that Carchedi is subject to misstatement liability under Rule 10b-5(b) and §17(a)(2). …

“The Court next addresses the SEC’s claims that all three Defendants are subject to ‘scheme liability’ under Rule 10b-5(a) and (c) and §17(a)(1) and (3). …

“Here, the SEC alleges two ‘extra’ fraudulent practices beyond Defendants’ preparation of misleading statements to investors. … Those practices were related to Allarity’s Board of Directors and to Company A (the licensor of dovitinib), respectively. …

“Although these two sets of allegations plausibly subject Carchedi and Cullem to scheme liability, the SEC’s corresponding allegations about Foegh are relatively threadbare. …

“Accordingly, the SEC has plausibly alleged that Carchedi and Cullem are subject to scheme liability under Rule 10b-5(a) and (c) and §17(a)(1) and (3), but the complaint falls short with respect to Foegh. The Court rejects Cullem’s argument that the SEC did not adequately plead that he acted with scienter. Like Carchedi, Cullem allegedly knew of the FDA’s negative feedback but took steps to conceal it, including by redacting the FDA meeting minutes and sending them to Company A. And, also like Carchedi, Cullem’s actions allegedly played in a role in his receiving a bonus and Allarity’s avoiding bankruptcy. The SEC thus has alleged, with particularity, facts plausibly demonstrating scienter (and negligence). …

“For the foregoing reasons, Carchedi’s motion to dismiss (Dkt. 52) is denied, Cullem’s motion to dismiss (Dkt. 47) is denied, and Foegh’s motion to dismiss (Dkt. 49) is allowed without prejudice to the SEC moving to amend its complaint within sixty days of the date of this order.”

Securities and Exchange Commission v. Carchedi, et al. (Lawyers Weekly No. 02-169-26) (22 pages) (Saris, J.) (Civil Action No. 25-cv-10599-PBS) (March 24, 2026).

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