United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON CROSS-MOTIONS FOR SUMMARY
Dennis Saylor IV United States District Judge
a civil enforcement action brought by the Securities and
Exchange Commission against Patrick Muraca and two companies
that he founded, NanoMolecularDX, LLC and MetaboRX, LLC.
Essentially, the SEC alleges that Muraca raised investor
funds and then diverted a substantial portion for his
personal use. The complaint alleges that defendants violated
§ 17(a) of the Securities Act of 1933, 15 U.S.C. §
77q(a), § 10(b) of the Securities Exchange Act of 1934,
15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. §
and NanoMolecularDX, LLC have filed cross-motions for summary
judgment. For the following reasons, the motion of the SEC
will be granted and the motion of NanoMolecularDX, LLC will
Muraca served as President and Chief Executive Officer of
NanoMolecularDX, LLC (“NMDX”) and MetaboRX, LLC
(“Metabo”). Both companies are Delaware limited
liability companies headquartered in Lee, Massachusetts. (Pl.
SOF ¶ 2-3)
business of NMDX was to develop technology for detecting and
monitoring biomarkers in oncology and endocrinology.
(Id. ¶ 5). NMDX's website stated that it
focused on developing in vitro diagnostic and
research-use-only diagnostic assays and kits. (Id.).
business of Metabo was to develop “novel therapies for
cancer and metabolic disease.” (Id. ¶ 6).
Metabo's website stated that it was building therapies to
“attack . . . fatty acid synthase (FAS), ”
“a well-tested, proven metabolic enzyme”
“that regulates the production of fatty acids in our
Muraca's Communications to Investors
April 2016, Muraca began soliciting investors for the
companies. (Id. ¶ 4). On September 6, 2016, he
e-mailed investors a solicitation letter that stated the
The proceeds from this Seed offering will be used primarily
for (i) Development and manufacturing of FAS and HER-2 for
the commercialization of Manual kits, (ii) commencing the FDA
review for the Nano based Product, and (iii) supporting
ongoing regulatory and operation efforts necessary for
commercialization. The completion of this Seed financial is
critical for our pre-commercialization efforts.
(Id. ¶ 7). He e-mailed investors another
solicitation letter on October 21, 2016, stating that
“the use of proceeds from this offering will be used
primarily for Manufacturing of pre-clinical test assays,
commercialization of the Tissue repository and clinical
histochemistry products and for ongoing regulatory efforts to
support our NanoMolecularDX development.” (Id.
¶ 8). On November 3, 2016, he e-mailed investors another
solicitation letter stating that additional investments
“will allow the company to move the development of the
Nuvera assets on the [Nano] platform forward and will help to
find a new initiative at the Center for Nanoscale Science and
Engineering (CNSE) for the development of this asset . . .
.” (Id. ¶ 9).
March 16, 2017, Muraca e-mailed investors a “financing
update” providing as follows:
Company seeks strategic financing up to a maximum of $1, 000,
000 USD in aggregate. The purpose of this strategic financing
1. Acquire assets of Nuclea Biotech through court-ordered
bankruptcy liquidation. The purchase price for these assets
is $300, 000, plus associated fees. Estimated total cost is
2. Assess, analyze and monetize the aforementioned assets.
Estimated cost is $350, 000.
3. Fund ongoing corporate operations, bridging the revenue
gap created by the billing cycle inherent in the current
service contract with [a large laboratory]. Estimated cost is
(Id. ¶ 10).
Muraca's Misappropriation of Investor
April 29, 2016, and June 30, 2017, fifteen individuals
invested $1, 175, 680 in NMDX and Metabo. (Id.
¶ 11; Albers Dec., ¶ 9). The investments were made
either by wire or by check. (Albers Dec., ¶ 9). Of that
amount, $73, 180 was deposited directly into Muraca's
personal bank account; $1, 002, 500 was deposited into
NMDX's business bank account; and $100, 000 was deposited
into Metabo's business bank account. (Id.,
¶¶ 11, 17, 19).
diverted at least $411, 684 of the investors' funds for
his personal use. In addition to the $73, 180 that he
received directly into his personal account, he transferred
$161, 549 into his personal account by checks from the NMDX
account and $23, 523 by checks from the Metabo account.
(Id., ¶ 10). Muraca also directly spent $125,
732 from the NMDX account and $27, 700 from the Metabo
account on personal expenses.
Muraca's Criminal Case
December 4, 2017, Muraca was indicted in the United States
District Court for the Southern District of New York.
(Huntington Dec., ¶ 2, Ex. 1). On June 20, 2018, the
government filed a superseding indictment asserting one count
of wire fraud and one count of making a false statement to
the FBI. (Id., ¶ 3, Ex. 2). The wire-fraud
count alleged as follows:
From at least in or about 2016, up to and including in or
about July 2017 . . . PATRICK MURACA . . . willfully and
knowingly, having devised and intending to devise a scheme
and artifice to defraud, and for obtaining money and property
by means of false and fraudulent pretenses, representations,
and promises, transmitted and caused to be transmitted by
means of wire, radio, and television communication in
interstate and foreign commerce, writings signs, signals,
pictures, and sounds for the purpose of executing such scheme
and artifice, to wit, 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
his personal use, and in connection therewith and in
furtherance thereof, MURACA transmitted and caused to be
transmitted interstate e-mails and wire transfers of funds.
(Id., ¶ 3, Ex. 2).
August 8, 2018, Muraca was convicted on both counts.
(Id., ¶ 4; Ex. 3). He was sentenced to 27
months in prison, followed by a supervised release term of
three years and restitution in the amount of $132, 780.
(Id., ¶5; Exs. 1, 4). It also appears that an
order of forfeiture and money judgment was issued in the
amount of $1, 165, 280. (Id., ¶ 5; Ex. 4).
filed this action on July 31, 2017. On March 15, 2018, the
United States filed a motion to intervene and to stay
discovery pending completion of the criminal case.
Court granted the motion to intervene and to stay on April
27, 2018. On March 15, 2019, the Court issued an order
lifting the stay.
has moved for summary judgment. NMDX has opposed the
SEC's motion and cross-moved for summary
Standard of Review
role of summary judgment is to “pierce the pleadings
and to assess the proof in order to see whether there is a
genuine need for trial.” Mesnick v. Gen. Elec.
Co., 950 F.2d 816, 822 (1st Cir. 1991) (internal
quotation marks omitted). Summary judgment is appropriate
when the moving party shows that “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed.R.Civ.P. 56(a).
“Essentially, Rule 56 mandates the entry of summary
judgment ‘against a party who fails to make a showing
sufficient to establish the existence of an element essential
to that party's case, and on which that party will bear
the burden of proof at trial.'” Coll v. PB
Diagnostic Sys., 50 F.3d 1115, 1121 (1st Cir. 1995)
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986)). In making that determination, the court must view
“the record in the light most favorable to the
nonmovant, drawing reasonable inferences in his favor.”
Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir.
2009). When “a properly supported motion for summary
judgment is made, the adverse party must set forth specific
facts showing ...