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A world-renowned geneticist and Stanford University professor has paid $29 million in fines after tricking his friend into investing $20 million in his “miracle cure” for Huntington’s disease.
Professor Stanley Cohen, 87, was found to have committed “a kind of actual fraud and…deception” by misleading investors into accessing a biotech company he founded in 2016, in a case that has strong parallels with that of Elizabeth Holmes, who dropped out of Stanford.
Holmes was sentenced in November to 11 years in federal prison after a jury found her guilty of defrauding investors through her former blood-testing company, Theranos.
Cohen’s company, Nuredis, was created in 2016 and offered not blood tests, but a cure for Huntington’s deadly degenerative disease.
Huntington’s is a rare inherited disease that causes progressive degeneration of nerve cells in the brain, leading to mood swings, anxiety, and depression. It affects about 41,000 Americans, according to the American Huntington’s Disease Society. There is no cure.
Cohen, the first geneticist to transplant genes from one living organism to another, encouraged Christopher Alafi, a family friend and longtime biotech investor, to invest $20 million in Nuredis, promising the company was pioneering work revolutionary.
Professor Stanley Cohen (left) has been ordered to pay back $20 million invested by Christopher Alafi (right), plus $9 million in interest. Cohen admitted during cross-examination that he knew the drug he ‘pioneered’ had been found unsafe more than 40 years ago.
But Cohen did not tell Alafi that the FDA had withdrawn the drug in 1976 because of “life-threatening side effects.”
It was placed on the ‘NON-COMPOSITED’ list, after causing loss of limbs and death.
In October 2018, Alafi sued Cohen for fraud, seeking a return on his investment plus interest. A California Superior Court issued an opinion ordering Cohen to return the cash in June of last year, and details of the case were first reported by the Stanford Journal at the end of last month.
Since then, Cohen has paid the full amount owed.
Earlier this month, the newspaper also reported how the College had lied when it said it was unaware of the case against Cohen, after discovering the subpoenas issued to bosses there.
Michael Gardener, Alafi’s lawyer, said the case was extremely painful for Alafi, because it marked the complete collapse of their decades-long friendship.
“They live close to each other … their families socialized with each other, attended Yom Kippur services together, visited each other in the hospital,” Gardener said.
‘I want to say that everyone trusted [Cohen] because he was a very close family friend and because he was a world-renowned scientist, so when he tells you something, you tend to believe it.’
Cohen, who until recently lived in a spectacular $5 million bungalow in Portola Valley in the San Francisco Bay area, swore under oath that he had told Alafi about the FDA warnings.
Cohen’s former home in the Portola Valley area is valued at more than $5 million. She lived there until a few years ago.
Cohen’s former Bay Area home boasted 1.7 acres and stunning mountain views
But, during cross-examination during his trial, he admitted that he had not.
Judge Beth McGowen ruled last month that Cohen should pay Alafi $29 million, following a June 25 ruling against him.
He stated, according to Stanford Daily, that Cohen was “not credible” and that his “testimony was sometimes inconsistent, confusing, and unreliable.”
Cohen remains employed by Stanford University, despite a senior professor telling The Stanford Daily, “the saga reads like a stain on the University.”
A spokesman initially told the newspaper that he was unaware of the case, but later revised his statement to admit that they had known about it for some years.
University spokesperson Dee Mostofi initially said they were unaware of the scandal, writing in a statement: “Activity related to [the since-dissolved venture] it would have been outside of Professor Cohen’s responsibilities at Stanford.
Stanford was cited in the case early in the 2018 lawsuit.
Elizabeth Holmes, a Stanford University dropout, was sentenced to 11 years in prison last year for defrauding investors in her biotech company, Theranos.
Earlier this month, another spokeswoman, Luisa Rapport, confirmed that the University did indeed know about the case.
she apologizes[d] for error’ and wrote that ‘the university responds to many subpoenas related to lawsuits in which Stanford is not a party.’
But she declined to comment on Cohen’s continued employment. Stanford recently made headlines for an ultra-woke language guide warning students not to use words like ‘teacher’ and ‘American’, which it declared to be harmful.
Cohen has not commented on the case.