In re: Galena Biopharma, Inc. Securities Litigation 14-CV-00367 ...

Case 3:14-cv-00558-SI Document 31 Filed 10/31/14

of 82

Jeffrey Ratliff [email protected] RANSOM GILBERTSON MARTIN & RATLIFF, LLP 1500 NE Irving Street, Suite 412 Portland, Oregon 97232 Tel: 503-226-3664 Liaison Counsel for Plaintiffs

Jeremy A. Lieberman [email protected] POMERANTZ LLP 600 Third Avenue, 20th Floor Tel: 212-661-1100

Laurence M. Rosen [email protected] Phillip Kim [email protected] THE ROSEN LAW FIRM, P.A. 275 Madison Avenue, 34th Floor Tel: 212-686-1060

Co-Lead Counsel for Plaintiffs

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

CASE No.:3:14-cv-00367-SI

IN RE GALENA BIOPHARMA, INC. SECURITIES LITIGATION, CONSOLIDATED CLASS ACTION

COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS

JURY TRIAL DEMANDED

Case 3:14-cv-00558-SI Document 31 Filed 10/31/14 of 82

I. NATURE OF THE ACTION ............................................................................................... 4

II. JURISDICTION AND VENUE ...................................................................................... 11

III. PARTIES .......................................................................................................................... 12

a. Plaintiffs. ........................................................................................................................... 12

b. CompanyDefendant. ....................................................................................................... 13

c. DreamTeamDefendants ..................................................................................................13

d. Galena Officer Defendants. .............................................................................................14

e. GalenaDirector Defendants. ........................................................................................... 15

f. Insider Trading Defendants ............................................................................................16

g. Compensationcommittee. ............................................................................................... 16

IV. BACKGROUND .............................................................................................................. 17

a. Securities laws on stock promotion. ............................................................................... 17

b. Publications targeted by Defendants. .............................................................................18

c. Companybackground. .................................................................................................... 21

V. DEFENDANTS’ MISCONDUCT .................................................................................. 23

a. ThePump. .........................................................................................................................23

i. Galena retains DreamTeam and Lidingo to manipulate its stock price. ....................... 23

ii. Defendants make false and misleading statements in a host of promotional articles. 28

b. The Dump. ..................................................................................................................... 36

i. Each of Galena’s directors receives an unprecedented options award valued at $516,000. ............................................................................................................................ 36

ii. Insiders sell more than $16 million in Galena shares in January 2014. .................... 37

c. Defendants’ market manipulation scheme is uncovered. .............................................42

d. Additional facts showing Defendants’ false statements were material. ...................... 49

i. Galena has a long-standing relationship with both Lidingo and DreamTeam, and has timed its stock offerings to coincide with their illicit stock promotions. ............................... 49

ii. Defendants’ fraudulent promotion causes soul-searching in the investment

community. .............................................................................................................................51

e. Additional facts probative of scienter. ........................................................................... 52

i. Email correspondence with Lidingo and Galena shows that Defendants understood that the campaign violated the securities laws. ............................................................................ 53

ii. While the stock promotion scandal unfolds, Defendants repeatedly lie to investors, and Ahnis fired for cause. ............................................................................................................55

2


iii. Kriegsman retains DreamTeam. .................................................................................... 62

iv. Galliker and Chin’s Kindred Biosciences hires DreamTeam. ....................................... 63

v. Galena sues over comments and an article posted on Seeking Alpha. .......................... 64

f. Respondeat superior and agency. ...................................................................................65

VI. LIABILITY OF THE INSIDER TRADING DEFENDANTS. ....................................67

VII. CLASS ACTION ALLEGATIONS ............................................................................... 69

VIII. APPLICATION OF PRESUMPTION OF RELIANCE: FRAUD ON THE MARKET ..................................................................................................................................... 71

3


Plaintiffs Kisuk Cho, Anthony Kim, Pantelis Lavidas, Alan Theriault, and Joseph

Buscema, (“Plaintiffs”), individually and on behalf of all other persons similarly situated, by

their undersigned attorneys, for their complaint against defendants Galena Biopharma, Inc.

(“Galena,” or the “Company”), Mark J. Ahn, Ryan M. Dunlap, Sanford J. Hillsberg, Richard

Chin, Stephen S. Galliker, Steven A. Kriegsman, Rudolph Nisi, Remy Bernarda, The

DreamTeamGroup (n/k/a The DreamTeamNetwork) (“DreamTeam”), Thomas Michael Meyer,

Michael McCarthy, Lidingo Holdings, LLC (“Lidingo”), and Milla Bjorn (collectively, the

“Defendants”), allege the following based upon personal knowledge as to themselves and their

own acts, and upon information and belief as to all other matters. Plaintiffs believe that

substantial evidentiary support will exist for the allegations set forth herein after a reasonable

opportunity for discovery.

I. NATURE OF THE ACTION

1. This is a securities class action on behalf of all persons who purchased or

otherwise acquired Galena’s common stock between August 6, 2013 and May 14, 2014,

inclusive (the “Class Period”).

2. This case is about a classic pump-and-dump scheme. Defendants surreptitiously

disseminated statements into the market inflating the price of Galena securities (i.e., the

“pump”). They then snapped their chance to sell their Galena shares for a massive profit (i.e., the

“dump”). This scheme is exactly the kind of market manipulation the federal securities laws

forbid.

3. Galena and its executives were the scheme’s primary architects, along with the

DreamTeam, Lidingo, Meyer, and Bjorn. They manipulated the market price of Galena stock by

publishing bullish articles regarding Galena on third-party websites. The articles falsely claimed

4


to have been written by sophisticated investors. Most even stated that they were not paid

promotions. Using other aliases, and purporting to be different Galena investors, the promoters

then echoed and cheered on the articles on other websites. Using yet more aliases, purporting to

be yet more Galena investors, the promoters posted links to the articles on message boards

discussing Galena stock. The posters purporting to have been convinced by the analysis, and

claimed they would buy more Galena shares. The promoters also covered online message boards

that discussed Galena’s stock with positive messages, and yelled down negative messages.

Defendants created a vast echo chamber that made investors believe that the endlessly repeated

analysis was correct and that there was a deep market for Galena’s stock.

4. Unbeknownst to the market, however, the articles were reviewed, approved, and

paid for by Galena, which demanded that the articles falsely state that the authors were not paid

for writing the articles.

5. The articles and the message board posts never disclosed that they were paid

promotions, and Galena’s SEC filings never disclosed that utilizing such stock promoters.

Indeed, not only did the articles themselves declare that they were not paid promotions, Galena

declared in its SEC filings that it was not manipulating its stock.

6. The scheme worked. Galena’s stock price rose from about $2 to $7.48 on January

16, 2014, its highest level in four years. Galena insiders, who all knew of the promotion as it was

discussed at several board meetings, then sold almost all their stock – more than $16 million of

it – beginning on January 17 , and ending less than a month later . Both the news of Galena

insiders’ sales and several investigative journalism pieces revealed the fraud. Galena’s stock

price reverted to $2, where it was before the promotion.

5


7. The pump:

(a) Beginning July 2013, Galena pays stock shills Lidingo LLC to tout its stock. As

part of this campaign, DreamTeam itself drafts positive articles about Galena and recruits third

parties to draft them. DreamTeam then shows the articles directly to Defendants Mark Ahn,

Galena’s CEO, or Remy Bernarda, its Vice-President of Investor Relations.

(b) Defendants Ahn and Bernarda themselves review, edit, and approve the articles

for publication. DreamTeam publishes the articles on a variety of third-party platforms, most

importantly Seeking Alpha. DreamTeam would periodically emails links to the published articles

to Ahn and Bernarda.

(c) Seeking Alpha is the leading website used by analysts, and professional and

institutional investors, to publish independent analysis and original investigative journalism

related to investment. Recognizing its influence, in September 2013 Galena actually sues over

comments made on a Seeking Alpha article. Galena alleges in the suit that “Seeking Alpha is a

leading website for financial news [that is] extremely influential [and] relied on by market

analysts, and viewed by millions of investors worldwide.” Galena Biopharma, Inc. v. Ioannides,

13-cv-1745-HA, ¶7 (D. Or. 2013).

(d) It is a rule of the promotional campaign that the articles may not disclose that they

were paid promotions. Indeed, all the articles published on Seeking Alpha affirmatively state,

just below the title, “I wrote this article myself, and it expresses my own opinions. I am not

receiving compensation for it. ” Anyone clicking a link to or viewing any published Seeking

Alpha article would see this disclosure. The campaign’s request is a per se violation of the

federal securities laws, which mandate that stock promoters disclose all compensation they have

received.

6


(e) The articles are published under a variety of bylines – either the actual names of

the third parties who were recruited to draft the articles, or fake aliases created by DreamTeam.

DreamTeam’s aliases falsely claim to be sophisticated professionals. One of DreamTeam’s alter

egos claims to be a fund manager of a real prestigious hedge fund. To reinforce the perception

that the articles are objective third-party analysis, DreamTeam then cites and discusses the

articles using different aliases on various blogs, message boards, and in social media.

(f) Lidingo Holdings LLC, for its part, issues email “blasts”, and “monitor[s]” third-

party message boards about Galena, “work[ing]” them to ensure the messages there express a

consistently positive opinion of Galena.

(g) The articles pump Galena’s stock price. Many of the articles caused Galena’s

stock price to increase 10% in a single day. Between July 2013 and January 2014, they push

Galena’s stock price from about $2 per share to $7 per share.

(h) Galena insiders’ relationship with DreamTeam is extensive. Galena has hired

DreamTeam since 2008. Defendant Kriegsman, a director of Galena who is the CEO of Galena’s

former parent CytRx Corp., retained DreamTeam to promote CytRx’s stock. CytRx sold $74.5

million of its stock while it was inflated by the DreamTeam promotion. Defendants Chin and

Galliker retained DreamTeam to promote the stock of Kindred Biosciences, Inc. (Chin is CEO,

and Galliker CFO, of Kindred). Kindred, a development-stage biotechnology company

developing prescription drugs for pets, sold more than $106 million of its shares while a

DreamTeam client. The stock prices of both CytRx and Kindred soared during DreamTeam’s

promotions.

(i) Galena also made false statements under its own name. In an underwriting

contract signed by Defendant Ahn and filed with the SEC in September 2013, during the

7


DreamTeam promotion, Galena falsely claimed that it had not manipulated and was not

manipulating its stock.

8. The dump:

(a) November 2013: Galena’s board’s compensation committee authorizes an award

of 200,000 options to every single director. Including the fair market value of these options,

Galena’s directors are better paid in 2013 than Enron’s directors in 2001. The awards are

unprecedented, both in amount and in timing, because Galena had always made awards at the

end of the year or in January of the following year.

(b) January 16, 2014: Galena’s stock price reaches its peak of $7.48, its highest level

since 2010.

(c) Beginning January 17, seven Galena insiders dump their shares, for a combined

total of more than $16 million. Six of the selling insiders sell between 87 and 100 percent of their

Galena shares; the seventh sells 19.6% of his shares.

9. The scheme unravels :

(a) January 17-January 31: As news of the insider stock sales enters the market,

Galena’s stock price falls from $7.48 to $5.27 on January 31, 2014, or 29.5%.

(b) February 1, 2014: analyst Matt Gravitt reveals that Galena had been paying

MissionIR, a DreamTeam “brand”, to promote Galena. Galena’s stock price falls from $5.27 to

$4.22, or about 20%.

(c) February 12, 2014: Adam Feuerstein reveals that bullish Galena articles had been

removed from Seeking Alpha for having been penned by false aliases. Galena’s stock price falls

from $5.22 to $4.26, or about 16.3%.

(d) February 14, 2014: Ahn admits that Galena had paid DreamTeam to tout its stock.

8


Galena’s stock price falls from $4.36 to $3.73, or about 14%.

(e) March 13, 2014: analyst Richard Pearson discloses that executives at both Galena

and its former parent, CytRx Corp., had personally reviewed the fraudulent promotional articles

before their publication. Pearson, who had gone undercover as a DreamTeam promoter, cites

changes to his articles that were inputted by Defendant Kriegsman’s executive assistant.

Galena’s stock price falls from $3.25 to $3.02, or 7.1%.

(f) March 17, 2014, after close of trading: Galena reveals that it is the target of an

SEC investigation over the promotions. On March 18, 2014, Galena’s stock price falls from

$3.22 to $2.82, or about 12 %.

(g) May 14, 2014: Adam Feuerstein reveals that the SEC investigation has a broad

scope, with the SEC serving a subpoena in its investigation of Galena on Lion Biosciences, Inc.,

where Defendant Hillsberg is a director. Over the next three days, Galena’s stock price falls from

$2.37 to $2.17, or about 8.4%.

10. The cover-up:

(a) In addition to DreamTeam and Lidingo, Galena had hired a legitimate investor

relations firm, Tiberend which it was paying about one tenth of what it was paying to

DreamTeam and Lidingo. In December 2013, this investor relations firm warns Defendant

Bernarda that touting stock without disclosing compensation “border[s] on fraud.” Days later, the

legitimate firm presents to Bernarda one of the scam articles that falsely claimed no connection

with Galena, though it was actually drafted by paid promoters and reviewed and authorized by

Galena. Bernarda recognizes the author. Indeed, she had authorized an article using the same

alias a bit more than a week earlier, and either she or Ahn approved the very article the

legitimate firm presented to her. Bernarda pretends to the investor relations firm that she does not

9


recognize the author.

(b) February 10, 2014: investigative journalist Adam Feuerstein emails Bernarda,

claiming to have discovered the promotional scheme, and even providing DreamTeam’s name as

the promoter. At Galena’s direction, within hours, DreamTeam emails their lawyers, Greenberg

Traurig LLP (“GT”), asking whether they could lawfully promote stock without disclosing the

promotion. (In a nice touch, DreamTeam claims its question relates to a potential future

promotion, rather than fraud it has already committed). On February 11, GT unambiguously

responds that the promotion was unlawful, and that day DreamTeam forwards the email to

Galena. Feuerstein published his article on February 12, and that very day Ahn fires

DreamTeam. Days later, Ahn falsely tells a journalist Galena had fired DreamTeam for

performance reasons.

(c) In February 2014, a reporter confronts Ahn with the insider sales. Ahn claims that

Galena insiders sold their shares in January because they had been locked up for nine months

before January 2014. But several emails Ahn received in December 2013 from his CFO showed

that the blackout period preventing trades had only begun in December 2013. Ahn tells the same

reporter that the Seeking Alpha articles were written and published by independent third parties.

He tells a two-member Galena special committee investigation that he had not reviewed

Lidingo’s articles. The special committee concludes that Ahn had lied.

(d) Within hours of publication of Mr. Feuerstein’s articles, DreamTeam scrubbs its

many websites of any mention of Galena or CytRx. This was no simple task; DreamTeam’s

websites had included an extensive archive of Galena’s public statements, more than fifty blog

posts, and links to third-party articles.

(e) Other Defendants lie when caught, too. Galena’s Board holds a January 16

10


meeting, a day before the first insider stock sales. The January 16 board minutes claim that the

board had discussed its insider trading policy and authorized insider sales. But the meeting

participants did not remember any discussion and had vastly different understandings of

Galena’s insider trading policy. Galena’s special committee investigation finds that the board

minutes discussing the insider trading policy are “inconsistent” with the facts.

(f) In August 2014, Galena fires Ahn for cause. But Galena falsely tells investors that

Ahn had resigned to pursue other professional and personal interests.

11. Galena insiders engaged in the scheme to manipulate Galena’s stock price by

hiring DreamTeam and Lidingo to tout Galena’s stock in a campaign that was a per se violation

of the federal securities laws and that embroiled the promoters in making false statements on

every article they published on Seeking Alpha. Galena insiders used the DreamTeam defendants

and other authors as their agents, and were controlling persons over the campaign. Galena

insiders then profited by selling more than $16 million of Galena stock while in possession of

material non-public information. When caught, they lied repeatedly.

12. There was no community of sophisticated investment professionals who believed

Galena was a good investment – just DreamTeam and Lidingo, using a host of different names

and false aliases. Galena’s stock today trades for about $2 per share, right where it was before

the DreamTeam and Lidingo promotions.

II. JURISDICTION AND VENUE

13. Jurisdiction is conferred by §27 of the Exchange Act. The claims asserted herein

arise under §§10(b), 20A, and 20(a) of the Exchange Act (15 U.S.C. §78j(b), §78t(a) and

§78t(b)), and Rule 10b-5(a)-(c) promulgated thereunder (17 C.F.R. §240.10b-5). This Court has

jurisdiction over the subject matter of this action under 28 U.S.C. §1331 and §27 of the

11


Exchange Act.

14. Venue is proper in this District pursuant to §27 of the Exchange Act and 28

U.S.C. §1391(b) as the Company’s principal executive offices are located in this district, the

Company conducts business in this district, and many of the acts and practices complained of

herein occurred in substantial part in this District. Defendants’ public statements that are alleged

to be false and misleading herein were transmitted into this District and relied upon by investors.

15. In connection with the acts alleged in this complaint, defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

limited to, the mails, interstate telephone communications and the facilities of the national

securities markets.

III. PARTIES

a. Plaintiffs.

16. Plaintiff Joseph Buscema bought Galena common stock during the Class Period

and was damaged thereby. Mr. Buscema’s PSLRA certification was previously filed on this

Court’s docket and is incorporated by reference. Mr. Buscema bought Galena shares on January

23 and 24, 2014.

17. Plaintiff Kisuk Cho purchased Galena common stock during the Class Period and

was damaged thereby. Dr. Cho’s PSLRA certification was previously filed on this Court’s

docket and is incorporated by reference. Dr. Cho bought Galena shares on (among other days)

January 22, 23, 24, 30, and February 7, 10, 18, 20, 24, all of 2014.

18. Plaintiff Pantelis Lavidas purchased Galena common stock during the Class

Period and has been damaged thereby. Mr. Lavidas’s PSLRA certification was previously filed

on this Court’s docket and is incorporated by reference. Mr. Lavidas bought Galena shares on

12


January 21, 22, and February 3, 12, and 14, all of 2014.

19. Plaintiff Anthony Kim purchased Galena common stock during the Class Period

and has been damaged thereby. Mr. Kim’s PSLRA certification was previously filed on this

Court’s docket and is incorporated by reference. Mr. Kim bought Galena shares on January 10,

15, and 17, 2014.

20. Plaintiff Alan Theriault purchased Galena common stock during the Class Period

and has been damaged thereby. His PSLRA certification is attached as an Exhibit to this

Complaint and is incorporated by reference. Mr. Theriault bought shares on, among other days,

January 17, 22, 27, 29, and February 3, all of 2014.

b. Company Defendant.

21. Defendant Galena is a biopharmaceutical corporation whose principal executive

offices are in Lake Oswego, Oregon. Its stock is listed and actively traded on the NASDAQ

under ticker “GALE”.

c. DreamTeam Defendants

22. Defendant The DreamTeamGroup, n/k/a DreamTeamNetwork (“DreamTeam”) is

an investor relations currently purporting to do business out of an office located at 815 Brazos

St., Suite 111, Austin TX 78701. DreamTeam uses dozens of separate “brands” to tout its

clients’ stocks, including MissionIR. Each of these brands, in turn, speaks in many voices;

according to a presentation on DreamTeam’s website, MissionIR itself hosts 30 investor-oriented

websites. DreamTeam specializes in small cap stocks.

23. Defendant Thomas Meyer is affiliated with DreamTeam. During the Class Period,

he published bullish Galena articles both under his own name and under false aliases with

elaborate invented histories.

13


24. Defendant Michael McCarthy was DreamTeam’s head for the entirety of the

Class Period. Defendant McCarthy corresponded extensively with Ahn and Bernarda.

25. Defendant Lidingo Holdings LLC (“Lidingo”) is a Nevada company purporting to

do business out of offices located at 2360 Corporate Circle, Henderson, NV 89074.

26. Defendant Milla Bjorn was Lidingo’s head since at least January 2012 and

through the whole Class Period. Defendant Bjorn corresponded extensively with Ahn and

Bernarda.

27. Collectively, Defendants Bjorn, McCarthy, Meyer, Lidingo, and DreamTeam are

the “DreamTeam Defendants”.

d. Galena Officer Defendants.

28. Defendant Mark J. Ahn was appointed as a director of Galena’s predecessor in

2007, and was appointed Galena’s President and CEO in March 2011. He remained in these

positions until, on August 21, 2014, he was fired, for cause, for his role in the events complained

of herein. In 2002, Ahn founded Hana Biosciences, remaining its CEO until August 2007.

29. Defendant Ryan M. Dunlap joined Galena as its Director of Finance, Controller,

and corporate Secretary, in July 2012. In July 2013, he was promoted to Senior Director,

Finance, and Chief Accounting Officer. On or before January 29, 2014, he became Galena’s

Chief Financial Officer.

30. Defendant Remy Bernarda has been Galena’s Vice President of Marketing &

Communications since May 2013. She is responsible for Galena’s investor and public relations.

She has twenty years of experience in finance and corporate communications. She has worked in

sales and trading with Goldman Sachs, where she was made Vice President, Bear Sterns, and

Knight Equity Markets. She holds an MBA. Between May 2006 and September 2008, she was

14


the director of investor relations of Ahn-founded Hana Biosciences; then, until January 2011, she

was Managing Director, Investor Relations & Communications of Blueprint Life Science Group.

After Blueprint, she became Vice President at IR Sense. Between June 2008 and June 2012, Ms.

Bernarda also served as a director of the National Investor Relations Institute’s Silicon Valley

Chapter.

31. Ahn, Dunlap, and Bernarda are the “Galena Officer Defendants”.

e. Galena Director Defendants.

32. Defendant Steven Kriegsman has served on Galena’s board since 2006. Since

2007, he has been the Chairman of Galena’s Compensation Committee. He is also CEO of

CytRx Corp., Galena’s former parent. Defendant Kriegsman sat on the Board of the Merchant

Bank of California in the late 1980’s, even as it collapsed following state and federal regulatory

enforcement actions. Kriegsman was also the personal accountant of its founder and Chairman.

Kriegsman was previously sued for securities fraud in an action styled In re Authentidate

Holding Corp. Securities Litigation , 1:05-cv-5323-LTS (S.D.N.Y.)

33. Defendant Richard Chin has served on Galena’s Board of Directors since 2009,

and has served on its compensation committee since 2011. Chin is also a co-founder of Kindred

Biosciences, Inc., a development-stage pet prescription drug company, and has been its President

and Chief Executive Officer since October 2012. Kindred Biosciences is a DreamTeam client.

34. Defendant Stephen S. Galliker has served on Galena’s Board of Directors since

2007, and served on its compensation committee between 2007 and 2010. Galliker also serves as

Chief Financial Officer of Kindred Biosciences.

35. Defendant Rudolph Nisi has served as a director of Galena’s Board since January

2009, and has served on its compensation committee since 2009.

15


36. Defendant Sanford J. Hillsberg has been a director of Galena since 2007.

Hillsberg is the managing partner of the law firm TroyGould, and represents various companies

that employ DreamTeam. For example, Hillsberg was one of TroyGould’s lead attorneys

representing Kindred Biosciences, Inc., in its IPO in November 2013 as well as its follow-on

offering in April 2014, when it was a DreamTeam client. Defendant Hillsberg’s TroyGould

profile indicates that he represents clients in SEC reporting and corporate governance.

37. Kriegsman, Galliker, Hillsberg, Nisi, Chin, Bernarda, and Dunlap are the “Galena

Director Defendants.” Galena and the Individual Defendants are the “Galena Defendants.”

DreamTeam and the Galena Defendants are the “Defendants.”

f. Insider Trading Defendants

38. Defendant Mark Schwartz has been a Galena Executive Vice President, and its

Chief Operating Officer, since April 2011. Defendant Schwartz regularly attended board

meetings, including the board meetings held on October 11, 2013, and January 16, 2014.

39. In January 2014, seven Galena insiders sold, in aggregate, more than $16 million

of their stock.

40. Ahn, Kriegsman, Chin, Nisi, Hillsberg, Galliker, and Schwartz, the sellers, are the

Insider Trading Defendants.

g. Compensation committee.

41. During the Class Period, Galena’s Compensation Committee consisted of

Kriegsman, Chin, and Nisi.

42. The Compensation Committee’s responsibilities included:

Purpose of the Committee

The primary purpose of the Committee is to (1) carry out the responsibilities

16


specified in this Charter relating to the compensation of the Company’s executive officers and non-employee directors and (2) review and approve a compensation discussion and analysis, and prepare a report regarding executive compensation, for inclusion in the Company’s annual proxy statement, if such compensation discussion and analysis and report are required by applicable Exchange Act rules and regulations. In carrying out its responsibilities, the Committee should balance (a) the Company’s interest in conserving cash and preventing stockholder dilution and (b) the Company’s interest in using compensation to attract, retain and motivate management. In reconciling these competing concerns, the Committee should act in what it believes to be the long-term best interests of the Company and its stockholders. Responsibilities and Authority of the Committee The Committee will, whenever necessary or otherwise appropriate:

• Review, and make recommendations to the Board for determination, the proposed adoption, amendment or termination of incentive compensation plans and equity-based plans and administer the Company’s existing compensation plans and equity-based plans.

• Grant stock options, shares of restricted stock and other equity-based awards under the Company’s incentive compensation plans and other equity-based plans, including awards to the Company’s Chief Executive Officer and other executive officers, and determine the terms of such stock options, shares of restricted stock and other equity-based awards.

IV. BACKGROUND

a. Securities laws on stock promotion.

43. Section 17(b) of the Securities Act of 1933 [15 U.S.C. 77q(b)] is commonly

known as the “anti-touting” provision. It prohibits publicizing information about a security

without “fully disclosing” any consideration received or to be received, directly or indirectly,

from the issuer. Id.

44. Congress enacted the anti-touting provision in part to “meet the evils of the

‘tipster sheet’ as well as articles in newspapers or periodicals that purport to give an unbiased

opinion but which opinions in reality are bought and paid for.” S.E.C. v. Wall St. Pub. Inst., Inc. ,

851 F.2d 365, 376 (D.C. Cir. 1988) (quoting House Committee Report, H.R. Rep. No. 85, 73d

Cong., 1st Sess. 6 (1933)).

17


45. An investor bulletin put out by the SEC explains that:

Paid Promoters: Some microcap companies pay stock promoters to recommend or “tout” the microcap stock in supposedly independent and unbiased investment newsletters, research reports, or radio and television shows.... The federal securities laws require the publications to disclose who paid them for the promotion, the amount, and the type of payment. But many fraudsters fail to do so and mislead investors into believing they are receiving independent advice .

(Emphasis added) b. Publications targeted by Defendants.

46. Seeking Alpha is a financial news and analysis website. It publishes third party

reports, analysis, and commentary as articles, and permits open discussion of the articles. As of

February 2014, Seeking Alpha had 3 million registered users, and as of August 2013, received

between 500,000 and 1 million unique visitors per day. It received Forbes’ Best of the Web

Award in 2007, and took first place in Inc. Magazine’s list of Essential Economic blogs. Galena

has filed two separate lawsuits over statements made on Seeking Alpha.

47. Seeking Alpha lets authors write about individual companies. Seeking Alpha

authors have written about almost 7,000 companies. Seeking Alpha also lets users comment on

these articles.

48. In March 2014, four researchers from Purdue’s Krannert School of Management

found a relationship between negative articles on Seeking Alpha and subsequent low stock

returns. The published article, titled “The Wisdom of Crowds: The Value of Stock Opinions

Transmitted Through Social Media”, 1 concluded that Seeking Alpha articles, and negative

comments on those articles, were correlated to lower stock prices at each of 3 months, 6 months,

1 year, and 3 years after the article was published. Id. at 40. The authors concluded that using

Seeking Alpha negativity in articles or commentary as an index outperformed broader market

1 Free version available at < http://tinyurl.com/kgnq8gd >.

18


indices. Id. at 31.

49. Seeking Alpha permits pseudonymously posting articles, but strictly enforces an

author’s code of conduct:

(a) Authors must disclose any position in any company they write about;

(b) Authors cannot be paid promoters;

(c) Authors cannot use multiple aliases without disclosure to Seeking Alpha, who

may then take appropriate action to ensure readers are not misled; and

(d) Authors must provide Seeking Alpha with their actual names and contact

information.

50. Each article published on Seeking Alpha must include the following disclosure:

Disclosure: The author has no position in [the stock discussed in the article] and no plans to initiate one in the next 72 hours [or, if the author has a short or long position, the type of position.] The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

51. This Complaint refers to the above mandatory disclosure, made in every article

published on Seeking Alpha, as the “Seeking Alpha Disclosure.”

52. Plaintiffs’ counsel spoke with Seeking Alpha Director of Contributor Success

Colin Lokey, who confirmed that Seeking Alpha specifically asks all authors to disclose to it any

consideration received for writing articles. If an author discloses receipt of consideration, “99%

of the time”, Seeking Alpha will not publish the article. The only exception Mr. Lokey could

think of was a prestigious underwriter who, in connection with a large offering, wanted to

provide investors reasons to buy stock that did not appear in offering documents. Even then, the

underwriter’s financial interest would be fully disclosed, and investors would know they were

19


viewing a paid promotion.

53. Forbes magazine is a prestigious business magazine, whose website is

www.forbes.com .

54. In 2010, forbes.com adopted a contributor model to generate content. As of

March 2014, it had about 1,200 contributors, who write about 7,000-8,000 posts per month, that

are viewed by about 63.5 million unique users per month, for a total of about 80 million page

views.2 Contributors pick their own topics, write their own articles, and are then paid based on

traffic flow. The prestige of the Forbes name makes it an influential bully pulpit.

55. Forbes.com permits paid promotional articles. However, to ensure that readers are

not misled, Forbes requires that promoters work through Forbes’s BrandVoice program, which

discloses in the article itself both that it is a paid promotion and the identity of the person

ultimately paying for the promotion. Forbes’s rules are geared to ensuring that sponsored content

is “transparent and clearly labeled for all to understand.” 3

56. Wall Street Cheat Sheet is an influential website targeted to investors. It purports

to receive 15,000,000 monthly unique visitors and 110,000,000 monthly page views. Its co-

founder topped Forbes’s list of Social Media Influencers, published June 2012. The Wall Street

Journal has stated that Wall Street Cheat Sheet is a top financial outlet.

57. Most of Wall Street Cheat Sheet’s articles are written by its professional staff.

However, in the fall of 2013, Wall Street Cheat Sheet launched a contributor network, eventually

clearing 12 outside contributors. 4 were DreamTeam aliases.

2 <http://www.forbes.com/sites/lewisdvorkin/2014/04/01/inside-forbes-the-role-of-pay-and-traffic-in-our-search-for-a-new-media-equation/ >. 3 <http://www.forbes.com/sites/lewisdvorkin/2013/02/04/inside-forbes-before-it-was-called-native-advertising-a-team-in-a-box-had-an-idea/ >

20


58. Wall Street Cheat Sheet forbids undisclosed stock promotions (i.e. contributors

must disclose if they are receiving compensation for writing an article).

59. TheStreet.com is a website, run by TheStreet, Inc., that provides news and

financial analysis targeted to investors.

60. TheStreet.com has adopted a formal conflicts and disclosure policies. Editorial

staff may not hold positions in individual stocks. While editorial staff may own mutual funds, the

ownership must be disclosed in any article referencing the fund. Outside columnists may at times

write about companies in which they hold shares, but must disclose such ownership. Outside

columnists may not be paid promoters.

61. Founded in 1993, Motley Fool is a multimedia financial-services company

offering investors free and fee-based products designed to help them take control over their

financial lives.

62. On its website, Motley Fool offers news, analysis, and commentary, including

commentary on individual stocks. Motley Fool’s website has millions of viewers.

63. Motley Fool permits investors to publish articles, and will let third parties

advertise on its site, but requires disclosure. Only registered account holders may post articles.

Users may not have more than one account, may not post promotional materials, and may not

violate the federal securities laws.

c. Company background.

64. Galena, then known as RXi Pharmaceuticals Corporation was spun off from its

parent CytRx Corporation in January 2007. CytRx remained majority owner until February 14,

2008. Defendant Kriegsman, CytRx’s CEO, remained a director of Galena after the spin off.

65. At all times, Galena was a small company. As of March 2013, Galena employed

21


12 employees, and as of March of 2014, Galena employed 60 employees.

66. In connection with the spin off, Ahn was appointed director of Galena.

67. In April 2011, Galena acquired Apthera, Inc., a private biotechnology company

located in Oregon. In connection with the acquisition, Defendant Ahn became CEO of Galena.

68. In September 2011, Galena announced that it would separate into two companies:

RXi, which would focus on developing RNAi-based therapeutics, and Galena, which would

focus on developing targeted cancer therapies. Ahn remained Galena’s CEO. Galena’s board

then consisted of Ahn, Kriegsman, Sanford Hillsberg, Richard Chin, Stephen Galliker, and

Rudolph Nisi.

69. Galena’s only commercial-stage product is Abstral® (“Abstral”), a propriety form

of fentanyl, an opiate analgesic. Fentanyl is used to treat breakthrough cancer pain (sudden

episodes of pain that occur despite around-the-clock treatment with pain medication) in cancer

patients who are already taking regularly scheduled doses of another narcotic pain medication

but who are tolerant of other narcotic pain medications. But it is regularly abused. According to

Director of the National Institute on Drug Abuse Dr. Nora D. Volkow, fentanyl is 50 to 100

times more potent than morphine. It is resold as a street drug, where its potency makes it a next

step for those already in the throes of addiction. It has caused numerous overdoses and deaths. 4

70. At least four other companies already offer generic fentanyl in the United States,

including Teva Pharmaceutical Industries Ltd., the leading generic drug manufacturer in the U.S.

and Europe. Galena’s purported competitive is that it offers patients a voucher for up to three

4 Fentanyl Use in Combination with Street Drugs Leading to Death in Some Cases, June 2006, available at < http://www.drugabuse.gov/about-nida/directors-page/messages-director/2006/06/fentanyl-use-in-combination-street-drugs-leading-to-death-in-some-cases >.

22


prescriptions for free for the patient’s first month. 5

71. Galena is far from obtaining financial success from selling Abstral, disclosing in

its 10-K for the year ended December 31, 2013, that:

We have only recently initiated our product launch of Abstral, our only approved product. We have a history of net losses and negative cash flows from operation and have not sold any other products, and cannot predict of or when we will become profitable . . . . We are unable to predict when, if ever, that we will generate profits from the sale of Abstral.

V. DEFENDANTS’ MISCONDUCT

a. The Pump.

i. Galena retains DreamTeam and Lidingo to manipulate its stock price.

72. Galena’s relationship with DreamTeam and Lidingo dates back to 2008 and 2012,

respectively. As set out more fully in ¶¶154-171 below, Galena had repeatedly hired them to

pump up its stock price in advance of its stock offerings. But as of early summer 2013, Galena

did not have any open contracts with either Lidingo or DreamTeam.

73. In the summer of 2013, Ahn determined to renew both Lidingo and DreamTeam

contracts. The July 2013 Lidingo renewal contract, signed by Defendant Ahn and dated August

1, 2013, obliges Galena to pay a cash fee of $20,000 per month plus expenses. (Exh. 37). 6

Though Ahn did not have authority to issue Galena stock options, the contract also awarded

Lidingo 250,000 options to buy Galena common stock at an exercise price of the price the day

the agreement closed, 100,000 of which vested immediately. In connection with its hiring,

Lidingo boasted to Ahn that it had helped raise its clients’ stock prices and that it had

5 < http://brontecapital.blogspot.com/2014/02/get-your-opiates-for-free-capitalism.html >. 6 Citations to “Exh. __” are to Exhibits to the Report to the Board of Directors of Galena Biopharma, Inc., Regarding the 2012-2014 Market Visibility Campaigns and the Sales By Insiders in the First Quarter of 2014. All cited exhibits are incorporated by reference.

23


“partnered” with Forbes.

74. Separately, in July 2013, Ahn also asked Bernarda to interview three investor

relations firm that could potentially increase Galena’s stock price. Tiberend Strategic Advisors

(“Tiberend”) and DreamTeam were two of the firms.

75. Founded in 1989, Tiberend is a traditional full service investor relations firm

specializing in the healthcare and life sciences industry. Bernarda recommended that Galena hire

Tiberend Strategic Advisors (“Tiberend”). Tiberend charged $3,500 per month for an initial three

months trial.

76. Bernarda recommended that Galena not hire DreamTeam, claiming it was better

to hire Tiberend, because it treated writers as “journalists”. Thus, on July 15, Bernarda stated that

by hiring Tiberend and not DreamTeam, Galena would avoid “run[ing] into the same issues ...” –

i.e., regulatory scrutiny. (Exh. 72).

77. But Ahn overruled Bernarda, and Galena also hired DreamTeam. DreamTeam

began its work pursuant to (a) a 90 day $25,000-per-quarter contract for Platinum Services dated

July 23, 2013, (Exh. 11) and (b) a 240 day $50,000 contract dated July 2013 (for a total of about

$14,583 per month). DreamTeam targeted retail individual (i.e., non-institutional) investors.

78. Galena’s promotional scheme called for DreamTeam and Lidingo to promote

Galena, using a wide variety of different channels. A basic element of the scheme was articles

posted on third party websites – predominantly Seeking Alpha – using a variety of aliases. The

aliases also falsely claimed to be established, credible investment professionals. Attached as

Exhibit A, and incorporated by reference herein, are the profiles of some of the aliases

DreamTeam used in promoting either Galena or CytRx. They include a fund manager who

claimed almost 20 years of experience (Christine Andrews), a fund manager who runs a trading

24


group (Kingmaker), a former professional trader (Equity Options Trader), a professional investor

(Expected Growth), a group handle for posters that included professors of finance and

accounting (Stock Whisper), and a portfolio manager for Zebra Capital (James Ratz), a real fund

with about $260 million in assets under management. All of the claims made in these profiles

were false because the profiles were, in fact, aliases used by DreamTeam to promote its clients,

and the persons who used the accounts were not fund managers, former professional traders,

professional investors, professors of finance, or portfolio managers, but DreamTeam employees

79. One of DreamTeam’s other selling points was that it would use a variety of

different aliases to make it appear that there was broad-based support for Galena. For example,

Galena stated it would use all of its “Family of Business Brands” (15 in all) and its Press

Distribution Partners (82 in all). (Exh 11).

80. The Galena promotion also extended to social media. In early 2014, analyst

Richard Pearson went undercover as a DreamTeam promoter. Defendant McCarthy told him that

DreamTeam had a team that monitored and posted on message boards. Lidingo stated in an email

to Ahn in January 2012 that it would monitor and “work” message boards to insert pro-Galena

messages and to “maintain a positive tone”. (Exh. 56). Indeed, soon after DreamTeam published

its pro-Galena articles, it used various aliases on social media to tout the articles touting Galena.

For example, hours after DreamTeam published a pro-Galena piece on August 6, 2013, two

aliases posted on a Yahoo! Finance Galena page that the article was “definitely worth checking

out” and an “encouraging article [] I’m buying more [Galena stock] tomorrow.” Similarly,

DreamTeam and Lidingo used numerous aliases on Facebook, Twitter, and other social

networking sites to call attention to the articles.

81. Defendants also used DreamTeam’s blog to call attention to the pro-Galena pieces

25


it published. There, however, DreamTeam presented the articles as the work of a third party. For

example, on November 27, 2013, DreamTeam published an article on Seeking Alpha using its

handle “Stock Whisper”. Soon thereafter, DreamTeam published an article on its blog, which

falsely that “Stock Whisper” had published a bullish Galena article on Seeking Alpha. The

DreamTeam blog post summarized and analyzed the DreamTeam Seeking Alpha article, without

disclosing that Defendants had in fact authored both. (Exhibit B, web archive of deleted posts on

DreamTeam blog).

82. Defendants also used aliases to respond to bearish articles. For example, after a

negative article appeared on Seeking Alpha on February 1, 2014 partially disclosing Defendants’

scheme, DreamTeam drafted two rebuttals, both purporting to be the work of third parties, for

Galena’s review. (Exh. 114).

83. Defendants used these many different fraudulent aliases to convince investors that

there was a broad base of independent and professional investors that supported Galena. This

information is material to markets for two reasons: (a) as stated in DreamTeam’s promotional

materials, 7 publishing under many different voices convinces investors that the analysis, repeated

so many times by so many different people, must be accurate – or, in the case of Defendants’

shouting down negative articles, that the negative analysis was inaccurate, and (b) it convinces

investors that there is heavy demand for Galena’s stock.

84. Ahn and Bernarda had actual knowledge that the articles were part of

DreamTeam’s paid promotion. Bernarda has made an admission against interest to Galena’s

7 A DreamTeam promotional brochure titled Social Media Relations Overview, available on a cached version of DreamTeam’s website, is attached as Exhibit C to this complaint, and is incorporated by reference. On page 8, it provides “We reach a vast audience through our partners and media contacts, and for those who do their own research, it certainly helps to have positive information coming from multiple sources.”

26


special committee that she knew the articles had been published as part of DreamTeam’s paid

promotion.

85. DreamTeam sent all articles to Galena for approval before publication. Ahn and

Bernarda approved the articles. None of the draft articles reviewed by Ahn and Bernarda

disclosed that they were paid promotional pieces.

86. According to both Ahn and McCarthy, the measure of DreamTeam’s performance

was Galena’s stock price. For example, on July 31, 2013, DreamTeam sent an email containing

nothing more than Galena’s stock price since the beginning of DreamTeam’s promotion on July

25. Because the stock price had increased, Ahn responded that DreamTeam was off to a “Great

start!” (Exh. 75).

87. Investors who focused only on Galena news, rather than the fraudulent third-party

promotional articles, were perplexed by the increase in Galena’s stock price. On November 23,

2013, investor Shawn Vincent published on Seeking Alpha an article titled “Galena Biopharma:

Luck Favors the Unprepared.” The author had placed an order to automatically buy shares of

Galena stock if its price reached a high enough level. When Defendants’ promotion sprung Mr.

Vincent’s trip-wire, and rose still more to leave Mr. Vincent with a sizable paper profit, Mr.

Vincent bemusedly attempted to explain Galena’s strange price increase. He could find no

rational explanation:

In conclusion, the more I look at the cause(s) of Galena's rapid rise, the less I want to do so. In fact, I probably would have missed the bulk of this run if I had been paying closer attention to the stock all along. Perhaps a new adage needs to be voiced for biotech investors in general: luck favors the unprepared. Armed with this new wisdom, I've decided to go against all instinct, training, and reason going forward with Gale. And simply use what's worked so far: dumb luck.

27


Long Galena, despite knowing better.

88. After Adam Feuerstein reported that Galena had hired DreamTeam to conduct a

fraudulent promotional campaign, Mr. Vincent wrote an addendum to his November 22 article,

attributing Galena’s stock price increase to DreamTeam’s promotional campaign.

ii. Defendants make false and misleading statements in a host of promotional

articles.

89. On August 6, 2013, after trading hours, Defendants published a bullish article

about Galena using alias Wonderful Wizard titled “Galena Biopharma Presents an Attractive

Investment Opportunity.” The article was posted on Seeking Alpha, and it recommended

investing in Galena stock. The article made the Seeking Alpha Disclosure – i.e., it falsely stated

that it was not a paid promotion, that the author held the views expressed in the article, and that

the author did not do business with Galena, which was false because the article was a paid

promotion. Ahn and/or Bernarda reviewed and approved the article before publication.

90. On August 22, 2013, after trading hours, Defendants published a bullish article

about Galena using alias Stock Whisper titled “Galena: 2 Goldmine Drugs for Cancer.” The

article was posted on Seeking Alpha, and it recommended investing in Galena stock. That day,

Galena’s stock price rose from $2.18 to $2.36, or almost 8.3%. There was no other Galena-

specific news that day. The article made the Seeking Alpha Disclosure, which was false because

the article was a paid promotion. Ahn and/or Bernarda reviewed and approved the article before

publication.

91. On September 26, 2013, before trading hours, Defendants published a bullish

article about Galena using alias Stock Whisper titled “Galena: Acquisition Prospects and

Exciting Catalysts.” The article was posted on Seeking Alpha, and it recommended investing in

28


Galena stock. That day, Galena’s stock price rose from $1.94 to $2.08, or over 7.2%. There was

no other Galena-specific news that day. The article made the Seeking Alpha Disclosure, which

was false because the article was a paid promotion. Ahn and/or Bernarda reviewed and approved

the article before publication.

92. On September 30, 2013, before trading hours, Defendants published a bullish

article about Galena using alias Stock Whisper titled “Buy Galena on Abstral Launch.” The


Galena’s stock price rose from $2.08 to $2.28, or over 9.6%. There was no other Galena-specific

news that day. The article made the Seeking Alpha Disclosure, which was false because the

article was a paid promotion. Ahn and/or Bernarda reviewed and approved the article before

publication.

93. On November 12, 2013, before trading hours, Defendants published a bullish

article about Galena using alias James Ratz titled “Will Galena Biopharma Triple Soon?” The

article was published on Wall Street Cheat Sheet. “James Ratz” falsely claimed to be a portfolio

manager with Zebra Capital Management, a real hedge fund. The article recommended investing

in Galena stock. The article did not disclose it was a paid promotion, which was a material

omission because the article was a paid promotion. Moreover, because Wall Street Cheat Sheet

forbids paid promotions, the market assumed that the article expressed the author’s opinion.

There was no other Galena news on November 12, 2013. That day, Galena’s stock price rose

from $2.49 to $2.68, or almost 9.4%. Ahn and/or Bernarda reviewed and approved the article

before Defendant.

94. On November 13, 2013, during trading hours, Defendants published a bullish

article about Galena using alias “Stock Whisper,” titled “Galena is Rallying On More Good

29


News for Investors.” The article was posted on Seeking Alpha, and it recommended investing in

Galena stock. That day, Galena’s stock price rose from $2.75 to $3.00, or almost 12%. There

was no other Galena-specific news that day. The article made the Seeking Alpha Disclosure,

which was false because the article was a paid promotion. Ahn and/or Bernarda reviewed and

approved the article before publication.

95. On November 22, during trading hours, Defendants published a bullish article

about Galena using alias “Kingmaker,” titled “Galena Biopharma Continues To Develop A Deep

Pipeline Of Products.” “Kingmaker” falsely claimed to “run a volatility trading group that

focuses on exploiting differences in IV vs. HV in biotech names with upcoming catalysts.” The


Galena’s stock price rose from $3.50 to $4.00, or almost 15%. There was no other Galena-

specific news that day. The article made the Seeking Alpha Disclosure, which was false because

the article was a paid promotion. Ahn and/or Bernarda reviewed and approved the article before

publication.

96. On December 3, 2013, Galena renewed its promotional agreement with

DreamTeam. The renewed contact was for a 150 day term, for the same work, at the same

quarterly $25,000 rate.

97. On December 4, 2013, Defendants published a bullish article about Galena using

Defendant Meyer’s real name, titled “4 Reasons Why Galena Biopharma Is Headed Higher”.

(Exh 7). The article was published on Wall Street Cheat Sheet and recommended investing in

Galena stock. The article misleadingly omitted to disclose it was a paid promotion. Moreover,

because Wall Street Cheat Sheet forbids paid promotions, the market assumed that the article

expressed the author’s opinion, and that it was not paid for. Ahn and/or Bernarda reviewed and

30




alias “Ted Mayer,” titled “Galena Investment Funds Are Taking A Big Stake In Galena

Biopharma.” The article was posted on Motley Fool, and it recommended investing in Galena

stock. The article misleadingly omitted to disclose that it was a paid promotion. Moreover,

because Motley Fool requires disclosure of paid promotions, the market assumed that the article

expressed the author’s opinion, and that it was not paid for. Ahn and/or Bernarda reviewed and



Defendant Meyer’s real name, titled “Hope For Breast Cancer Patients Is Around The Corner”.

The article was published on Forbes and recommended investing in Galena stock. The article

misleadingly omitted to disclose it was a paid promotion. Moreover, because Forbes mandates

disclosure of paid promotions, the market assumed that the article expressed the author’s

opinion, and that it was not paid for. Ahn and/or Bernarda reviewed and approved the article

before publication.

100. On January 15, 2014, Defendants published a bullish article about Galena using

alias “Christine Andrews,” titled “The Momentum Continues for Galena Biopharma.” “Christine

Andrews” falsely claimed to be a fund manager with almost 20 years of investment experience.

DreamTeam posted the article on Wall Street Cheat Sheet. On January 16, Galena’s stock price

rose from $6.77 to $7.48, or over 10%. The article misleadingly omitted to state that it was a paid

promotional piece. Moreover, because Wall Street Cheat Sheet forbids paid promotions,

“Andrews” lied to Wall Street Cheat Sheet, and the market assumed that the article expressed the

author’s opinion. On February 5, 2014, before trading hours, Defendants published a bullish

31

8

7

6

5

4

3

2

1

0

\ \rt9 P P P P P P P P P P P .\


article about Galena under John Mylant’s name titled “Galena Biopharma Has A Promising

Pipeline For Revenue Growth” The article was posted on Seeking Alpha, and it recommended

investing in Galena stock. The article made the false Seeking Alpha Disclosure. Ahn and/or

Bernarda reviewed and approved the article before publication.

101. Defendants’ widespread fraudulent promotion increased Galena’s stock price:

Galena stock price (rectangles are positive articles)

iii. Defendants make false and misleading statements in Galena’s SEC filings.

102. The paid promotional articles touting Galena sometimes coincided with Galena

news releases and SEC filings, facilitating the stock promotion scheme by highlighting and

amplifying news the Company released.

32


103. Shortly after retaining Lidingo and DreamTeam in July 2013, Galena initiated a

secondary offering. It filed an amended registration statement on Form S-3/A on August 9, 2013,

which the SEC declared effective on August 15, 2013.

104. On September 18, 2013, Galena sold 17,500,000 units, each consisting of one

share of common stock and a warrant to purchase 0.35 of a share of common stock at an exercise

price of $2.50 per share, for net proceeds to Galena of $32.6 million. Galena raised additional net

proceeds of $5.2 million through the underwriters’ exercise of their over-allotment option.

105. To conduct the offering, on September 13, 2013, Galena entered into an

underwriting agreement to sell its stock in a public offering (the “Underwriting Agreement”),

which Galena also filed that day with the SEC. The Underwriting Agreement was signed by

Defendant Ahn and provided under “Representations and Warranties of [Galena]”:

The Company has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock or any security of the Company to facilitate the sale or resale of any of the Securities. 106. The statement was false because Galena was manipulating its stock price through

its unlawful promotional campaign.

107. On September 13, 2013, Galena also published a Prospectus, in which Galena

commented on possible fluctuations in its stock price:

The market price and trading volume of our common stock may be volatile.

The market price of our common stock has exhibited substantial volatility recently. Between January 1, 2013 and September 3, 2013, the sale price of our common stock as reported on The NASDAQ Capital Market ranged from a low of $1.55 to a high of $3.00. The market price of our common stock could continue to fluctuate significantly for many reasons, including the following factors:

• reports of the results of our clinical trials regarding the safety or efficacy of our product candidates and surrogate markers;

33


• announcements of regulatory developments or technological innovations by us or our competitors;

• announcements of business or strategic transactions;

• changes in our relationship with our licensors and other strategic partners;

• our quarterly operating results;

• developments in patent or other technology ownership rights;

• public concern regarding the safety of our Abstral product or our product candidates;

• additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may result in dilution to our stockholders;

• government regulation of drug pricing; and

• general changes in the economy, the financial markets or the pharmaceutical or biotechnology industries.

In addition, factors beyond our control may also have an impact on the price of our stock. For example, to the extent that other large companies within our industry experience declines in their stock price, our stock price may decline as well. In addition, when the market price of a company’s common stock drops significantly, security holders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources.

108. The statement was misleading because it omitted to disclose that the most likely

cause of fluctuations in its stock price was its own unlawful campaign to pay stock promoters to

34


pump its stock.

109. On November 6, 2013, Galena filed its 10-Q/A for the quarter ending September

30, 2013. The 10-Q/A was signed by Defendants Ahn and Dunlap. The 10-Q/A did not disclose

that (i) Galena had retained DreamTeam and Lidingo to publish promotional articles designed to

inflate the price of Galena stock; (ii) Defendants Ahn and Bernarda directly reviewed, edited and

approved the articles prior to publication; and (iii) as a result of the foregoing, the Company’s

Prospectus filed with the SEC was materially false and misleading.

110. In accordance with the Sarbanes-Oxley Act of 2002, the November 6 10-Q/A was

certified by Defendants Ahn and Dunlap, who each declared that:

I have reviewed this annual report on Form 10-K of Galena Corporation;

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this annual report; []

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

[] Any fraud, whether or not material, that involves management or other

employees who have a significant role in the registrant’s internal control over financial reporting .

(Emphasis added)

111. Had Ahn and Dunlap disclosed the unlawful promotion to Galena’s auditor, it

would have instructed them to stop the fraud, and to seek board approval of the options issued to

Lidingo. Thus, Ahn and Dunlap did not disclose the fraud to Galena’s auditor. Thus, their

statement was false.

35


112. In January 2012, Galena adopted a Corporate Code of Ethics and Conduct (the

“Code”). The Code was continuously available on Galena’s website during the class period. The

Code specifically deals with the Company’s insider trading policies. The Code states, in relevant

part:

3. Stocks Because our stock is a publicly traded security, certain activities of

the Company are subject to certain provisions of the federal securities laws. These laws govern the dissemination or use of information about the affairs of the Company or its subsidiaries or affiliates, and other information, which might be of interest to persons considering the purchase or sale of our stock. Violations of the federal securities laws could subject you and the Company to stiff criminal and civil penalties. Accordingly, the Company does not sanction and will not tolerate any conduct that risks a violation of these laws. [...] b. Insider Trading It is illegal for any person, either personally or on behalf of others, (i) to buy or sell securities while in possession of material nonpublic information, or (ii) to communicate (to “tip”) material nonpublic information to another person who trades in the securities on the basis of the information or who in turn passes the information on to someone who trades. All directors, officers, employees and temporary insiders, such as accountants and lawyers, must comply with these “insider trading” restrictions. 113. The Code’s statements were false and misleading, because Galena’s officers and

directors violated the code when they sold over $16 million of shares in January 2014, when they

knew (a) Galena’s earnings for the year ended December 31, 2013, and (b) that Galena had hired

DreamTeam and Lidingo to unlawfully promote its stock.

b. The Dump.

i. Each of Galena’s directors receives an unprecedented options award

valued at $516,000.

114. Galena held a meeting of its compensation committee on November 22, 2013.

115. At the Board Meeting, it granted lavish stock options to Defendants, with each

director receiving 200,000 options with a strike price of $3.88:

36


Name Position/Title Number of Total 2013 Options compensation

Mark Ahn President, CEO & a Director 600,000 $3,099,363 Brian EVP & CMO 300,000 $930,339 Hamilton Mark COO 300,000 $1,583,640 Schwartz Ryan Dunlap Chief Accounting Officer (at the 150,000 $684,410

time) Rudolph Nisi Director 200,000 $633,470 Stephen Director 200,000 $628,220 Kriegsman Sanford Director 200,000 $671,220 Hillsberg Stephen Director 200,000 $749,720 Galliker Richard Chin Director 200,000 $610,970 William Director (appointed April 2013) 200,000 $706,670 Ashton

Source: 2014 Form DEF 14A (the “2014 Proxy Statement”)

116. The timing of the option grants was unusual, in addition, because as the 2014

Proxy Statement acknowledges, Galena typically awards options at the end of each fiscal year or

in January of the immediately following fiscal year.

117. The fair market value of the grants to each director was $516,100. The total 2013

compensation for each of Galena’s directors was between $610,970 and $749,720. For

comparison, Enron’s famously overpaid directors were paid an average of $400,000 in cash and

stock in 2001.

ii. Insiders sell more than $16 million in Galena shares in January 2014.

118. Galena’s original insider trading policy was to forbid employees and directors

from transacting in Galena’s stock without the affirmative preapproval of Ahn (the “Old

Policy”). (Exh. 18).

37


119. In the summer of 2013, Dunlap drafted an amended insider trading policy (the

“New Policy”. Dunlap’s version, dated August 15, 2013, defined “insider” to include directors,

and provided that:

(a) Insiders could not sell Galena stock while in the possession of material nonpublic

insider information, except in circumstances not relevant here; and

(b) All trades were restricted to pre-announced “trading windows.”

(Exh 19).

120. Thus, according to Dunlap, the New Policy was “a little less restrictive” than the

Old Policy. (Exh. 74).

121. Dunlap’s draft was submitted to Galena’s Nominating and Governance

Committee (the “Governance Committee”) for its consideration at its October 7, 2013 meeting.

The Governance Committee resolved that it would recommend that the Board adopt the draft

policy at its January 16, 2014 meeting.

122. On December 19, 2013, Galena’s outside counsel Dale Short of TroyGould told

Defendant Dunlap that Defendant Kriegsman sought to use options to buy 200,000 shares,

immediately selling them for a profit. Kriegsman’s sales were forbidden under both the Old

Policy (because the sale was not approved by Ahn) and the New Policy (because the sale fell

within a trading blackout). Further, Galena was at the time contemplating the acquisition of Mills

Pharmaceuticals, LLC. Thus, in addition, Kriegsman had material non-public information about

Galena’s proposed acquisitions. Dunlap advised Short that Kriegsman should not be selling

shares. (Exh 100).

123. Short quickly responded by asking Galena to break its insider trading policy:

“Yes, it’s an issue, but he seems insistent, if you know what I mean. If the sale is

38


approved, we could caution him in writing of the risk associated with the sale. Let me know if I can give Steve the go-ahead and I will provide the cautionary advice.”

(Exh. 100).

124. Short also sent Dunlap two more emails asking him to break company policy for

Kriegsman’s benefit. Short added that the sale should be authorized because “[i]t seems to me

that you can expect other directors to want to sell shares to realize on their stock options.” (Exh.

100).

125. On December 20, Kriegsman personally emailed Mr. Dunlap, copying Ahn,

declaring that he would sell 200,000 shares of Galena stock, effective immediately. In response,

Ahn reiterated that Kriegsman could not sell Galena stock at the time, but said he would be

“delighted” to allow Kriegsman’s sale in mid-January 2014, in violation of (a) Galena’s previous

announcement that trading would not be permitted until March 13, and (b) Galena’s previous

determination that earnings are material non-public information. (Exh. 101).

126. On January 16, 2014 the Board held a meeting, in which the Board was provided

with Galena’s preliminary 2013 earnings. The preliminary earnings information was not publicly

disclosed. (Exh. 23).

127. The January 16 minutes state that Ahn told the directors that insiders could trade

in the Company’s stock immediately. The Board minutes reflect that there was a subsequent

discussion among the Board and that the Board lifted the blackout on trading. None of the Board

members, however, actually remembered discussing or voting on the matter. Moreover, in

interviews with the Special Committee, the selling directors took varying positions on whether

there was a blackout at all, making any sort of approval unnecessary, a permanent blackout

subject to Ahn’s preapproval, which would require the directors to obtain it, or a blackout subject

39


to open windows. Had the selling directors debated and voted on a resolution permitting trading,

and then sold their shares in reliance on the resolution, it is unlikely they would have such

discrepant memories. And as the Special Committee concluded, the directors’ varying memories

are “inconsistent” with the Board minutes, suggesting the minutes were doctored. (Special

Committee Report, at page 32). Even if there was an authorization, Galena’s Special Committee

concluded that “the Company opened a trading window seemingly for the sole purpose of

allowing insiders to sell substantial shares of their Company stock.” ( Id. )

128. Galena insiders then sold over $16 million of their stock:

Name Date Shares Price Proceeds Percentage of ($) total holdings

sold Kriegsman January 23, 150,000 Sale at $5.92 888,540

2014 per share January 22, 250,000 Sale at $6.13 1,532,500 2014 per share January 17, 200,000 Sale at $7 per 1,400,000 2014 share

Total - 600,000 3,821,040 96.8% Kriegsman Name Date Shares Price Proceeds Percentage of

($) total holdings sold

Hillsberg January 30, 250,000 Sale at $5.41 1,352,500 2014 per share January 17, 200,000 Sale at $6.93 1,385,000 2014 per share

Total - 450,000 2,737,500 93.3% Hillsberg Name Date Shares Price Proceeds Percentage of


Nisi January 29, 250,000 Sale at $5.41 1,320,000 2014 per share January 17, 200,000 Sale at $6.93 1,380,000 2014 per share I

Total - Nisi 450,000 2,700,000 98.6%

40


Name Date Shares Price Proceeds Percentage of ($) total holdings

sold Chin February 12, 187,500 Sale at $4.33 812,438

2014 per share January 30, 75,000 Sale at $5.57 418,755 2014 - $5.61 per

share Total - Chin 262,500 1,231,193 100% Name Date Shares Price Proceeds Percentage of


Galliker February 3, 300,000 Sale at $4.18 1,253,040 2014 per share

Total - 300,000 1,253,040 96.8% Galliker Name Date Shares Price Proceeds Percentage of


Schwartz January 30, 100,000 Sale at $5.57 556,500 2014 per share

Total - 100,000 556,500 19.6% Schwartz Name Date Shares Price Proceeds Percentage of


Ahn January 27, 796,765 Sale at $4.83 3,848,374 2014 per share

Total - Ahn 796,765 3,848,374 87% Total - All 2,959,265 16,147,647 Defendants

129. The stock sales were not made pursuant to pre-arranged Rule 10b5-1 trading

plans, and none of the selling Defendants had sold Galena stock on the open market in the

previous four years.

130. Defendants engaged in such sales in part for two reasons. First, on January 16,

2014, Galena’s stock price reached its highest point in since February 2010. The insiders’ sales,

which began on January 17, were thus perfectly timed. Second, insiders understood that Galena’s

41


of 82

dealing with DreamTeam could be discovered at any time.

131. Galena insiders were well aware that their stock sales were inappropriate. For

example, forced to disclose insiders’ stock sales on SEC Forms 4, a Galena manager sought

“cool ideas/tricks” to file the required forms with the SEC without alerting investors. Defendant

Dunlap suggested Galena voluntarily file numerous insider small “buys” to confuse markets. In

response, Defendant Ahn added: “Got it ... just spoke to John [Burns, a senior Galena manager].

Let’s keep these issues to the 3 of us.” (Exh. 107, 109).

c. Defendants’ market manipulation scheme is uncovered.

132. Ahn and Dunlap were correct that the dump would alert Galena investors and

drive down its stock price.

133. Galena’s stock price peaked on January 16, at $7.48 – the highest it had been

since March 2010. The very next day, Galena insiders began selling shares.

134

Despite Defendants’ efforts, the market noticed the Forms 4 announcing insiders’

stock sale.

135. On January 23, the U.S. Federal News Service called attention to Hillsberg sale of

200,000 shares. On January 24, 2014, Markus Aarnio posted an article on Seeking Alpha titled

“Galena Biopharma: 3 Different Insiders Have Sold Shares This Year.” On January 27, Galena

appeared on a list of the top 30 public companies – ranked by the dollar value of insiders’ stock

sales in the previous week.

136. Galena’s stock price did not rise above its January 16 level. By January 31, 2014,

driven by news reports of and concerns about insiders’ sales, the price had fallen by $2.21, from

$7.48 to $5.27, or about 29.5%.

137. Matt Gravitt first discovered the illicit stock promotion. Mr. Gravitt published an

42


article on Seeking Alpha titled titled “Galena Biopharma: Numerous Red Flags Suggest A

Significant Overvaluation,” which was first openly released to the public on February 1, 2014.

Mr. Gravitt visited the website www.stockpromoter.com , a website that collects information

concerning paid promotions based on disclaimers, and permits investors to type in a company

symbol to see whether they are involved in any current promotion. A search there revealed that

tips.us (a website run by DreamTeam) had been promoting Galena, and though

stockpromoters.com listed no compensation, a visit to tips.us revealed that Galena was one of the

many companies paying DreamTeam “affiliate” MissionIR. Mr. Gravitt thus concluded that

“MissionIR” had been promoting Galena’s stock. The article was released to premium Seeking

Alpha subscribers on January 31, 2014, and to the public on February 1, 2014, and provided in

relevant part:

Paying Companies for Stock Promotion and Significant Insider Selling are Major Red Flags

Stock Promotion When I first started investing in/trading biotech stocks, I was fortunate enough to

have several trading mentors impart valuable insight and words of wisdom that has helped contribute to my success. These “words of wisdom” included a warning about stocks that are constantly “pumped” over the internet.

As outlined in a March 2012 article by SeekingAlpha contributor Michael Morhamus, GALE’s moves higher can be partially attributed to heavy promotion of the stock via the internet. After reading the article, I thought it brought up some interesting points and additional research into the matter was warranted. Needless to say, I came across some noteworthy pieces of information as it relates to Galena’s stock being “promoted” via various outlets.

Stockpromoters.com is a website that (among other features) allows users to type in a company symbol and see whether or not they are involved in any current promotions and if they are, how much they paid for it. A search for “GALE” yielded results that certainly validate the claims made in the aforementioned article. According to the website, there have been 27 different instances of GALE being “promoted” since March 2012. I am not suggesting that this is good, bad, or indifferent. I am simply pointing out some of the information I came across.

However, further investigation revealed that Galena was paying for these promotions. This, for me, is definitely a red flag.

According to a disclaimer found on the tip-us website, MissionIR received

43


compensation from “GALE for 240 days of advertising, branding, marketing, investor relations and social media services provided by MissionIR and affiliate DreamTeamGroup Business Brands.”

This potentially explains a part of the massive increase in the company’s SG&A Expenses (obviously a large part of the increase was due to the Abstral launch).

138. On February 3, 2014, the next trading, Galena’s stock price fell on heavy volume

from $5.27 to $4.22, or about 20%.

139. The next disclosure came on February 12, 2014, during trading hours, when

journalist Adam Feuerstein reported that he had uncovered Galena’s deceptive scheme:

NEW YORK (TheStreet) -- Two articles touting Galena Biopharma (GALE) were removed from Seeking Alpha Monday because they were written by the same person using different aliases.

This is the second time Seeking Alpha has been forced to take action against individuals using multiple aliases to tout Galena, a small drug developer with a breast cancer vaccine in a phase III study. In January 2013, the investor Web site removed five articles promoting Galena written by the same individual under three different pseudonyms.

The most recent incident is more serious and potentially damaging because of evidence linking Galena to a stock-promotions firm which wrote and published the articles on Seeking Alpha . The articles were part of a broader, coordinated “brand awareness campaign” designed to boost Galena’s stock price, according to a document obtained by TheStreet .

Aided by this promotional campaign, Galena shares tripled in value from this summer. Coincidence or not, Galena insiders have made millions of dollars by selling company stock in January.

Galena did not respond to phone calls and emails seeking comment. In July 2013, Galena paid $50,000 to a subsidiary of The DreamTeam

Group for 240 days of “advertising, branding, marketing, investor relations and social media services,” according to a disclaimer on The DreamTeam Group’s Web site.

[Update: Following publication of this story, DreamTeam Group removed the Galena compensation disclosure from its web site. Here is the screen shot disclosing Galena’s payment to DreamTeam Group.]

$ GALE: Msia-91R, an affiliare ol OramTedmGrL.p. recLved $50000 froni GALE for 240 days of adver1iirg. brardIn, meI,ç, irweLQr iIIIoiis and soca1 media serykes provided by MisiorIR and ffuIite DreaMTeofioroup BflS ElFaridg, PladSe rad Qn11F,$ Mi rlIR DIsdimr fr FULL

CnipenaIIon sosure.

44


Publicly traded companies routinely pitch their stock to new investors, but some of DreamTeam’s marketing tactics appear to resemble stock promotion schemes which run afoul of standard investor relations practices. Among its other services, DreamTeam Group operates more than two dozen investor Web sites with names like “Home Run Stocks,” “Touchdown Stocks,” “Quality Stocks,” and “Tout Sheet.” The Web sites entice investors with stock picks that can “trade for at least a 100% profit.”

All the stock picks touted on these DreamTeam Web sites, including Galena, are paying clients -- a fact omitted from the Web sites unless someone clicks on a small disclaimer link.

Galena was promoted on many of the DreamTeam stock-touting Web sites to create “market buzz about the company to a new group of investors,” according to a DreamTeam document, “Galena Biopharma Case Study: Investor Awareness Campaign” obtained by TheStreet .

As part of this campaign, DreamTeam published favorable articles about Galena on Seeking Alpha on Aug. 7, 2013 and Nov. 22, 2013, according to the case-study document. But the articles were written under aliases and make no mention of DreamTeam or its paid marketing relationship with Galena. Instead, they’re written from the perspective of individual investors recommending aninvestment in Galena to other readers of Seeking Alpha .

On Nov. 22, “Kingmaker” published a similar article on Seeking Alpha titled, “Galena Biopharma Continues to Develop a Deep Pipeline of Products.” Neither article disclosed a financial relationship with DreamTeam Group or Galena.

Both articles were removed from Seeking Alpha on Monday because they were written by the same person.

“We pulled the Aug. 6 and Nov. 22 articles. Upon investigation, the contributor was in violation of our Terms of Use because ‘Kingmaker’ and ‘Wonderful Wizard’ were the same person but failed to tell us so,” said Seeking Alpha Vice President of Content and Editor in Chief Eli Hoffman.

Seeking Alpha was unable to determine if the author was paid by DreamTeam Group to write the two articles on Galena, added Hoffman. Hoffman would not disclose the real identify of the author publishing under the “Kingmaker” and “Wonderful Wizard” aliases.

The DreamTeam Group promoted Galena’s stock in other ways than just publishing Seeking Alpha articles.

“By December 20, 2013, DTG has published a total of 50 unique GALE-centered blogs that were distributed throughout the DTG network and a number of investor-oriented community site on the Internet such as StockHouse, StockTwits, Seeking Alpha and Wall Street Cheat Sheet,” DreamTeam explains in the document obtained by TheStreet .

DreamTeam also employs people who promote the stocks of paying clients on message boards, Facebook and via Twitter, according to the document.

DreamTeam Managing Partner Michael Andrew McCarthy did not respond to a message left on his cellphone.

45


All that DreamTeam promotion worked wonders for Galena’s stock price, which tripled in value from $2 per share in July 2013 to almost $7.50 in the middle of January. DreamTeam’s contract for eight months of work with Galena ends this month.

Galena CEO Ahn unloaded $2.8 million in company stock in January, according to SEC filings. Director Steven Kriegsman, who’s also the CEO of Cytrx (CYTR_), pocketed $2.1 million from the sale of Galena stock in the same month, according to SEC filings. Other Galena executives and directors have also been selling shares.

Cytrx is also a DreamTeam Group client, paying $65,000 for a year’s worth of stock promotion, according to a disclaimer on DreamTeam Group’s Web site.

The timing of the Galena insider sales may or may not be related to the end of the promotional work being done by Galena. In a recent published interview, Ahn said he sold part of his Galena holding to “diversify for my family.”

140. On February 12, on heavy volume, Galena’s stock price fell from $5.22 to $4.26,

or 16.3%, damaging investors.

141. In an email sent 3:25 PM PT on the 12th – within hours of Mr. Feuerstein’s article

– Galena fired DreamTeam. Shortly thereafter, DreamTeam began attempting to destroy all

evidence of its relationship with Galena and CytRx. DreamTeam deleted the disclaimer

referenced in Mr. Feuerstein’s article from its website, as well as almost all Galena and CytRx

articles it had published on its websites.

142. On February 13, 2014, after trading hours, the website Buyers’ Strike posted an

expose of DreamTeam. Buyers’ Strike visited DreamTeam’s purported offices located at 7399

North Shadeland Avenue, Indianapolis, IN 46256, and found an empty storefront.

143. On February 14, 2014, during trading hours, Shawn Vincent (an analyst working

for a private equity firm) published an article on Seeking Alpha attributing Galena’s stock price

performance since November 2013 to DreamTeam’s promotional efforts.

144. Also on February 14, 2014, during trading hours, Galena published an open letter

46


to its investors written by Defendant Ahn. The letter, though styled as a rebuttal of Mr.

Feuerstein’s article, actually admitted that Galena had engaged DreamTeam Group:

“The only facts in Mr. Feuerstein's most recent article that are remotely accurate are that Galena previously engaged the DreamTeamGroup and that insiders at the company, including me, divested shares in mid January.”

145. On February 14, 2014, on heavy volume, Galena’s stock price fell from $4.36 to

$3.73, or 14%, damaging investors.

146. On March 13, 2014, during trading hours, analyst Pearson published an expose of

DreamTeam’s promotions on Seeking Alpha. Focusing on CytRx Corporation, Mr. Pearson’s

expose first revealed to the markets that Defendant Kriegsman (as CytRx’s CEO) had edited at

least one purported DreamTeam article before publication.

A few weeks ago I received an email and subsequent phone calls asking me to be a paid stock tout for an IR firm called The Dream Team Group. The sender first informed me about an article he wanted on CytRx Corp.... He clearly had no idea what he just stumbled into by contacting me of all people. The individual ultimately revealed his name to be Tom Meyer. He later informed me that the IR form he works for was the Dream Team and that he worked closely with the head of Dream Team, Michael McCarthy.... I was offered $300 per article, but was also told there were two conditions. First, management [] would have to sign off (and edit) the articles. Second, I would not be allowed to disclose that I was getting paid.

147. As evidence of Galena’s (and CytRx’s) editorial control over DreamTeam’s

media reports and articles, Mr. Pearson released his emails with DreamTeam members which

discussed the importance of final Company approval over these materials. For example, on

January 18, 2014, Tom Meyer wrote to Mr. Pearson from his [email protected]

email address, stating:

Hi Rick,

47


Thanks for getting back to me so soon. I work for an IR firm and I have a team that I manage. So when the firm has a new client, they will ask me to start getting some articles published on various sites. And then my team will get started on it.

We typically cover biotech companies but occasionally will have some others as well. When I give you an assignment, you will type up the draft and then send back to me so I can get the company's approval. I will send you back the edited version and then you can publish. Once published, I will pay you $300. We send checks to our guys every 2 weeks.

148. Similarly, Mr. Pearson published an email between him and Mr. Meyer in which

they specifically discussed an article touting Galena which was written by DreamTeam-paid

author John Mylant under the auspices of impartial investment advice. On February 6, 2014, Mr.

Pearson asked Mr. Meyer:

[O]n GALE, I thought that John Mylant did a great piece this week, but he did not address the short attack. [D]id the company approve his piece?

To which Mr. Meyer responded:

John wrote his article before the short piece came out. It was published after but written before. The company just took a long time to approve it. Wouldn't have been fair to make him go back and add something else.

He's been working for me 4 months or so. He's pretty good, gets things written pretty quick. GALE is just slow my friend. I chatted with Michael [McCarthy – Head of DreamTeam] last night and they're still pending. I can't make them approve when I say, it's up to them unfortunately.

149. That day, on heavy volume, Galena’s stock price fell from $3.25 to $3.02, or

7.1%, damaging investors.

150. On March 17, after close of trading, Galena filed its annual report on Form 10-K

for the year ended December 31, 2013. The 10-K disclosed an SEC probe of Galena:

“In February 2014, we learned that the SEC is investigating certain matters relating to our

company and an outside investor-relations firm that we retained in 2013.”

48


151. Later that night and the following morning, Bloomberg and The Oregonian drew

attention to Galena’s disclosure of an SEC probe. On March 18, on heavy volume, Galena’s

stock price fell from $3.22 to $2.82, or 12%, damaging investors.

152. On May 14, 2014, the market got a glimpse into the breadth of the SEC’s

investigation. That day, in an article titled SEC Casting Wide Net in Galena Investigation, Mr.

Feuerstein revealed that Lion Biotechnologies, Inc. had recently disclosed that it had received a

subpoena in the SEC investigation of Galena. Galena’s stock price fell from $2.37 on May 14 to

close at $2.17 on May 16, or about 8.4%, damaging investors.

d. Additional facts showing Defendants’ false statements were material.

153. In addition to the facts pled above, more facts show that Defendants’ false

statements were material.

i. Galena has a long-standing relationship with both Lidingo and

DreamTeam, and has timed its stock offerings to coincide with their illicit

stock promotions.

154. Galena’s relationship with Lidingo and DreamTeam goes back years. In October

2008, DreamTeam began posting positive articles about Galena on its blog. It continued posting

articles on its blog, for example, announcing Galena’s annual investor conference, 8 its inclusion

on the Russell Microcap index, 9 and a Galena licensing agreement. 10

155. In late 2011, Lidingo was recommended to Defendant Hillsberg. Hillsberg then

8 <http://dreamteamnetwork.com/blog/rxi-pharmaceuticals-corp-rxii/rxi-pharmaceuticals-corp-rxii-to-webcast-investor-event-2 > 9 <http://missionir.com/blog/small-cap-news/rxi-pharmaceuticals-rxii-added-to-the-russell-microcap-index/> 10 <http://missionir.com/blog/small-cap-news/rxi-pharmaceuticals-corp-rxii-acquires-license-to-advirna-technology/>

49


suggested that Ahn consider it as an investor relations firm, and on January 4, 2012, Galena

retained Lidingo. Lidingo’s contract called for it to review Galena’s research and development

plan, provide strategic input on investor relations, generate independent coverage of Galena

through third parties, and distribute key press releases and news items through its network. (Exh.

36).

156. Galena’s explicit purpose in retaining Lidingo and DreamTeam was to boost

Galena’s stock price, as confirmed by correspondence between Defendants. On November 12,

2012 to Defendant Ahn, Lidingo’s managing member Milla Bjorn pitched its premium email

promotion services for $20,000 for the rest of the year. Bjorn stated that Lidingo’s previous

promotions on October 3, 17, 25, and 31, of 2012, had each increased Galena’s stock price and

volume. 11 Bjorn guaranteed that if Galena’s stock price did not increase by at least 25% by year

end, Lidingo would refund Galena’s $20,000 fee. Ahn quickly agreed to pay the $20,000. (Exh.

62). Similarly, when Lidingo sought to be retained by Galena in July 2013, its pitch was simple:

Galena’s stock price was low, and Lidingo had helped other companies raise theirs. Lidingo did

not mention any other reason to hire it. (Exh. 170). Similarly, on July 31, 2013, DreamTeam sent

an email containing nothing more than Galena’s stock price since the beginning of DreamTeam’s

promotion on July 25. Because the stock price had increased, Ahn responded that DreamTeam

was off to a “Great start!” (Exh. 75). The Defendants regularly measured the promotion’s

success based on Galena’s stock price (and, relatedly, the volume of transactions in Galena’s

stock) and do not appear to have used any other metric. (Exh. 58, 61, 66).

157. Since 2012, Galena has timed its offerings to coincide with stock promotions.

11 The statement was accurate, except that Galena’s stock price had decreased by about 2% on the 31st. Even with the decrease on the 31st, Galena’s stock price increased 18.5% in October 2012.

50


Having hired Lidingo in January 2012, Galena sold $12.75 million of its stock in April 2012.

Having paid for premium Lidingo services in November 2012, Galena sold $24.25 million of

stocks and warrants in a public offering in December 2012. Later, when it retained Lidingo and

DreamTeam in July 2013, Galena sold $35 million of its stock in September 2013.

158. Galena’s directors knew of Lidingo’s engagement. Galena had a policy requiring

that its audit committee ratify all contracts with a value exceeding $100,000. The Audit

Committee ratified Lidingo’s engagement at its November 8, 2012 meeting.

ii. Defendants’ fraudulent promotion causes soul-searching in the investment

community.

159. On February 13, 2014, journalist John Kimelman published an article on Barron’s

titled “When Investor Websites Get Duped: Seeking Alpha’s policy of granting anonymity to

writers of stock stories can have troubling consequences”, noting Mr. Feuerstein’s article, and

distinguishing Barron’s because it did not rely on anonymous contributors.

160. A March 20, 2014 article titled “At Financial News Sites, Stock Promoters Make

Inroads,” on Fortune summed up the events, in part, as follows:

While not all of the facts are clear, the websites admit that they were duped. In the past few weeks, more than 100 articles have been pulled from Seeking Alpha, Wall St. Cheat Sheet, and other websites that have been caught up in the stock promotion scheme.

161. Then, on May 27, 2014, Seeking Alpha was forced to run an editorial apologizing

to its readers for the Exchange Act Defendants’ misconduct called, “What Seeking Alpha Is

Doing to Prevent Paid Stock Promotion.” In an effort to “identify and prevent stock manipulation

on Seeking Alpha in response to recent discoveries,” Eli Hoffman, Seeking Alpha’s Editor-In-

Chief, explained that:

51


Recently, our editors were forced to remove a number of articles from Seeking Alpha after we discovered that their authors had been compensated by stock promoters to publish positive articles on specific stocks. In their disclosures, the authors lied – explicitly stating that they were not receiving third-party payment for their articles. To be clear: Seeking Alpha does not allow paid stock promoters or IR firms to submit articles about stocks with which they have a relationship.

We are grateful to Richard Pearson for his outstanding undercover work in unearthing foul play on Seeking Alpha and other investing websites, and for sharing his research with us proactively so that we could deal promptly with non-compliant authors. You can read Richard’s recent articles on this topic here and here.

162. Further, Seeking Alpha, Wall Street Cheat Sheet and Forbes highlighted the

Defendants’ deceptive conduct by removing the promotional articles they had published from

their websites. On March 20, 2014, Mia Carbonell, a spokesperson for Forbes confirmed that the

articles had been removed and that Defendant Meyer would no longer contribute to the site

because, “[a]fter careful consideration, we determined that the content did not meet Forbes’

editorial guidelines.”

163. Analysts concluded that the promotional campaign was material. On February 18,

2014, in response to the revelation that Galena had engaged DreamTeam to tout its stock, an

analyst at investment bank Cantor Fitzgerald lowered its price target, and downgraded Galena

from Buy to Sell, citing the promotion as her reason. Notably, there are two intermediate steps

between Buy and Sell, meaning that the Cantor Fitzgerald analyst found the news was very

material and warranted a severe downgrade.

e. Additional facts probative of scienter.

164. In addition to the facts pled above, more facts show that Defendants’ false

statements were made with scienter.

52


i. Email correspondence with Lidingo and Galena shows that Defendants

understood that the campaign violated the securities laws.

165. Galena knew Lidingo paid its “writers” for positive Galena articles. Lidingo’s

contracts called for Galena to cover its expenses, which included payments to Lidingo’s writers.

In an email sent on April 7, 2012, Bjorn asked Madeline Hatton, Galena’s Manager, Operations

& Administration, whether Galena’s check had been sent, stating that “the writers were due to be

paid on April 5.” Ahn signed the check. (Exh. 59).

166. Lidingo’s emails to Galena updating it of its activities disclosed obvious and

brazen violations of the securities laws. Lidingo regularly provided as-published articles or as-

sent email blasts to Ahn, sometimes at his request, which never disclosed that they were paid

promotions. (Exh 67, 69). Sometimes Dunlap was copied. (Exh. 84, 85). Ahn knew that the

articles violated the securities laws; in fact, after Feuerstein’s article, he falsely told Galena’s

special committee that he never reviewed Lidingo’s work. The special committee itself

concluded that he probably lied. Beyond the articles, Lidingo’s emails to Galena disclosed

practices that clearly violated the securities laws. In an email sent to Ahn on January 18, 2012

(mere weeks after being retained), Lidingo stated that it “ha[d] published original articles by our

writers on various websites and have distributed them directly to a targeted audience of several

hundred thousand in the investment community. Additionally, we have leveraged other news and

utilized [third-party] message boards and forums to increase traffic to those sites. Message

boards have been monitored closely and will continue to be worked through out campaign to

maintain a positive tone. ” (Exh. 56) (Emphasis added).

167. Ahn understood that Lidingo offered one advantage over a Galena-run investor

relations campaign: deniability. For example, on April 19, 2013, after Galena demanded that

53


Lidingo lower its rates, Defendant Bjorn reminded Defendant Ahn of one advantage in

continuing the campaign (rather than doing investor relations in-house): “keep in mind we offer a

layer of protection; a safer more efficient option.” (Exh. 70).

168. DreamTeam’s communications also suggested that the promotion violated the

securities laws. A marketing brochure created by DreamTeam for potential clients provides:

[DreamTeam drafted] Articles are directed towards sophisticated investors who understand complex evaluation of investments, and we publish our articles where these investors commonly go to seek investment ideas – ensuring that the highest quality content about YOUR company gets seen by the right people. We use our own writers to generate content, and we utilize our network for distribution. We reach a vast audience through our partners and media contacts, and for those who do their own research, it certainly helps to have positive information coming from multiple sources. Seeking Alpha, which boasts more than 1 million members, is the No. 1 outlet we use to circulate this kind of detailed information for our clients.” [Using Seeking Alpha], we’ve received more than 6,500 views for a single article, and our articles are also featured on many prominent sites, including Yahoo! Finance. We not only craft superior content – we maximize its effectiveness on your behalf.

(Exhibit C).

169. But Seeking Alpha does not permit paid promotional articles, and mandates that

all articles must disclose that they are not paid promotions. Thus, DreamTeam’s promotional

materials boasts of the impact of its fraud.

170. On November 26, 2013, DreamTeam sent Bernarda a list of the articles it had

published on Seeking Alpha since its retention. (Exh. 10). The list included 18 articles providing

links to each. Each of the articles bore the false Seeking Alpha Disclaimer. Moreover, the email

itself provided the alias used in publishing each article, and provided a link to the author’s profile

page. None of the authors’ profiles disclosed that they were used by DreamTeam. Galena knew

the claims made on the author pages were false – for example, it knew that Kingmaker, Stock

54


Whisper, and Wonderful Wizard were not successful professional investors, because it knew that

they were alter egos used in their own promotional campaign.

171. Indeed, Defendants had already had a prior run in with Seeking Alpha’s policy

against paid promotions. In December 2012 and January 2013, at least five articles were

published on Seeking Alpha under aliases Elegant Trading, Momentum Trading, and Thomas

Option Hunter, all of which were DreamTeam aliases. The five articles, all of which touted

Galena’s stock, were in fact authored by a single individual. “Momentum Trading”, “Elegant

Trading”, and “Thomas Option Hunter” were all aliases used by DreamTeam. Upon discovering

that the articles all were written by the same person, Seeking Alpha removed them. Seeking

Alpha also contacted the author. 12 After the articles were removed, “Momentum Trading”,

“Elegant Trading”, and “Thomas Option Hunter” disappeared.

ii. While the stock promotion scandal unfolds, Defendants repeatedly lie to

investors, and Ahn is fired for cause.

172. Defendants repeatedly lied to conceal both the promotional campaign and their

own role in it.

173. On July 10, 2013, Bjorn of Lidingo emailed Ahn, commenting on Galena’s poor

stock price performance, and offered Lidingo’s services to boost it. Ahn forwarded Lidingo’s

email to Bernarda. Lidingo boasted that it had partnered with Forbes, and that its promotions had

increased other clients’ stock prices. (Exh. 170).

174. On August 1, 2013, Ahn renewed the contract with Lidingo. Two Galena

executives – Ms. Hatton and Defendant Bernarda – claim that Ahn falsely told them the contract

12 <http://www.thestreet.com/story/11823518/1/seeking-alpha-author-used-multiple-aliases-to-tout-biotech-stocks.html .>

55


with Lidingo was not renewed.

175. Ahn and Dunlap concealed from Galena’s board that Ahn had awarded Lidingo

options. Ahn did not have authority to issue stock options, but nonetheless executed the

consulting agreement that provided options to Lidingo. Ahn did not consult the Board or

Galena’s general counsel. Ahn also kept the contract a secret. Ahn’s Executive Assistant kept all

Galena contracts. When Defendant Dunlap asked her to locate the Lidingo stock options

agreement, she told Defendant Dunlap on November 13, 2012, that she had searched through the

entire folder, but had not found any Lidingo agreement. (Exh. 82). Dunlap then found the

agreement in Ahn’s own files, noting that it provided Lidingo with stock options.

176. Ahn did not disclose that he had awarded Lidingo stock options either in a

November 22, 2013 compensation committee meeting where it granted options to employees, or

in a January 16, 2014 board meeting when it ratified the contract with Lidingo, minus the stock

options. (Exh 22, 28). Dunlap and Bernarda attended both meetings, but neither raised Ahn’s

misconduct with the Board.

177. On December 6, 2013, third party investor relations firm CSIR Media Group

offered to write paid promotional articles for Galena. Bernarda forwarded the article to Tiberend.

On December 12, 2013, Tiberend responded:

“1. Galena has no shortage of coverage on the leading blogs (SeekingAlpha, Motley Fool), all the result of genuine contributor interest in the company’s story. Thus, paying for more isn’t necessary. 2. We don’t necessarily discount pay-for-play on the whole, but what CSIR GRoup and other ‘IR Firms’ are doing with these financial blogs is bordering on fraud. They are asking for fees but not disclosing that the resulting article was paid for by the company. They generally hide this connection (you pay CSIR Group; they pay a blogger), but I think this will eventually get noticed by regulators and trouble could ensue.”

(Exh. 99). 178. The following Monday, December 16, 2013 Tiberend’s Claire Sojda, replying to

56


the December 12 Tiberend email, emailed to Bernarda an article discussing Galena Defendants

published under Defendant Meyer’s own name. Tiberend asked Bernarda to read the article,

complimented the author, and asked Bernarda whether she had talked to him. Bernarda had, in

fact, approved an article from “Tom Meyer” on December 3, 2013. Moreover, since it was

DreamTeam’s practice to seek approval of all articles from Ahn and/or Bernarda before

publication, Ahn and/or Bernarda had approved the very article Tiberend emailed to Bernarda.

But Bernarda denied knowing who Defendant Meyer was. (Exh. 99).

179. When analysts called attention to the insider stock sales, Ahn lied about them, too.

In a fawning interview published by Seeking Alpha on February 4, 2014, Ahn stated that he had

sold his shares to diversify his stock holdings. This was false because Ahn had sold shares to

cash in on DreamTeam’s promotion. Ahn also stated that “[t]here are no ongoing SEC

investigations. Period.” In fact, Galena would later admit that it had learned in February 2014

that it was the target of an SEC investigation, but Ahn never retracted or corrected his statement.

180. In a further interview on February 14, 2014, Ahn stated that insiders had sold

stock in January 2014 because they had been prevented from selling stock for nine months

prior. 13 In fact, emails sent to all insiders including Ahn indicate that Galena’s blackout period

had only begun on December 2, 2013. Ahn’s statement thus gave investors the false impression

that the stock sales were sales that insiders had been contemplating for a long time rather than

the dump following the DreamTeam pump. In the same interview, Ahn falsely stated that he’d

been told the Seeking Alpha articles were written by an independent writer, rather than the

DreamTeam. In fact, DreamTeam had sought Ahn and Bernarda’s approval of all of the articles,

13 Nick Budnick, Lake Oswego firm Galena Biopharma defends itself over marketing campaign, insider sell-off, The Oregonian, February 14, 2014, available at < http://www.oregonlive.com/politics/index.ssf/2014/02/lake_oswego_firm_galena_biopha.html >.

57


and so could not have believed that they were written by an independent writer.

181. In an open letter addressed to shareholders dated February 14, 2014, Defendant

Ahn was quoted as saying that “[t]he only facts in Mr. Feuerstein’s [February 12, 2014] article

that are remotely accurate are that Galena previously engaged [DreamTeam] and that insiders at

the company, including me, divested shares in mid January.” There were other facts revealed in

Mr. Feuerstein’s articles that Defendant Ahn knew to be true, including:

(a) That Galena had launched a broad, coordinated “brand awareness campaign”

designed to boost Galena’s stock price.

(b) That DreamTeam had published 50 unique Galena-centered blog posts.

(c) That the authors of the August 6 and 22 articles were the same person.

(d) That DreamTeam had employed people to promote Galena’s stock on message

boards, Facebook, and Twitter.

182. In an article published March 7, 2014, Ahn was quoted as saying: “I don’t

consider [Seeking Alpha] a credible source of news. Nor do I pay attention to it. Well, look I

have to pay attention to it... Let me put it this way, it has the equivalent status of social media”.

Ahn’s statement was false because (a) in fact, Galena monitored Seeking Alpha closely, and

would issue correction demand letters and file lawsuits shortly after negative press there, and (b)

Galena admitted in a complaint it itself filed that Seeking Alpha is “a leading website for

financial news [and it is] extremely influential [and] relied on by market analysts, and viewed by

millions of investors worldwide”. See ¶ 212, below.

183. In an article published March 17, 2014, Ahn was quoted as saying:

“Asked whether the company [Galena] reviewed the [DreamTeam articles before they were posted, Ahn responded, ‘No, absolutely not ... The company did not

58


review any of their activities’” 14 184. In the same article, Ahn was also quoted as saying that he had no idea the Seeking

Alpha articles were the result of the DreamTeam marketing campaign.

185. Both statements were false exculpatory statements because Ahn personally

reviewed many of the articles before they were published, and he and his close colleague

Defendant Bernarda reviewed all the articles before they were published.

186. In the same March 17 article, Ahn was quoted as saying about DreamTeam that

“we no longer use them and [Feuerstein’s article] has nothing to do with it. We tried them for a

few quarters. We rated them as moderately effective if at all, and we decided not to continue.” In

fact, emails released by Galena show that Ahn had fired DreamTeam because Mr. Feuerstein

discovered its unlawful promotion:

(a) Monday February 10, 2014, at 9:25 A.M. PT: Adam Feuerstein first contacts

Defendant Bernarda about DreamTeam. Defendant Bernarda immediately forwards email to

Tiberend, and by 10:45 AM PT has held a conference call with Tiberend. Tiberend forwards

DreamTeam Galena case study to Bernarda at 10:40 AM PT. (Exh. 104)

(b) Less than an hour later, February 10, 2014, at 11:36 A.M. PT: Galena puts a hold

on all DreamTeam articles. (Source: Exhibit D to this Complaint, Email from Defendant Meyer

to Richard Pearson).

(c) Less than an hour later, on February 10, 2014, at 12:42 PM PT: DreamTeam

seeks an opinion from GT about disclosure of paid promotions. DreamTeam falsely represents to

GT that it is concerned about whether it must disclose paid promotions in the future. (Exh. 71).

14 Nick Budnick, California investor takes aim at stock promoting, reports Lake Oswego biotech firm, The Oregonian, March 17, 2014, available at < http://www.oregonlive.com/health/index.ssf/2014/03/california_investor_takes_aim.html >.

59


(d) February 11, 2014, at 9:42 AM PT: GT unambiguously states that “if you are

describing the stock of a company, you must disclose the amount you are being paid or you are

violating the securities laws.” (Exh. 71).

(e) February 11, 2014 at 10:45 AM PT: DreamTeam reports GT’s conclusion to Ahn.

DreamTeam’s email indicates that DreamTeam’s request came from Galena, as DreamTeam

states that “I just got this [GT response] back this morning.” (Exh. 71).

(f) February 12, 2014, at 9:45 AM: Feuerstein’s article exposing Galena’s

relationship with DreamTeam is published.

(g) February 12, 2014, at 12:25 PM PT: Galena fires DreamTeam. The email firing

DreamTeam provides “[t]hank you for the conversations this week as we worked through the

issues.” (Exh. 106).

187. Moreover, Defendants had been hiring DreamTeam and Lidingo since 2008, not

for a few quarters, had paid them hundreds of thousands of dollars, not a marginal amount, and

had timed all of their recent capital raises to follow on the heels of stock promotion campaigns.

Thus, it is not true that Galena rated DreamTeam “moderately effective”.

188. On February 17, 2014, Galena’s Board convened a so-called Special Committee.

The Special Committee completed its report on July 15, 2014.

189. The Special Committee’s report documented certain of Ahn's misconduct,

including:

(a) It concluded that Ahn had paid Lidingo stock options in violation of company

policy;

(b) It concluded that Ahn may have breached his fiduciary duty;

(c) It concluded that Lidingo likely violated the federal securities laws;

60


(d) It concluded that Ahn had lied to the Special Committee;

(e) It concluded that Galena’s minutes for the January 16 meeting that purportedly

authorized selling Galena stock was “inconsistent” with the facts, raising an inference that the

minutes had been doctored.

190. On August 11, in an earnings conference call, Ahn announced that the Special

Committee had completed its investigation, but that the Board awaited its report.

191. On Monday, August 18, 2014, Galena’s board held a special meeting.

192

On August 20, 2014, Feuerstein announced that a source close to Galena had

informed him that Ahn had been fired for cause. At the time, neither Galena nor anyone else had

announced that Ahn had left the company.

193. On August 21, Galena issued a press release claiming that Mark Ahn “resigned”

as President and CEO.

194. On August 21, 2014, Ahn declined to confirm or deny that he had been fired for

cause. 15

195. On August 22, Galena filed a current report with the SEC. The Current Report

falsely stated that Ahn had “resigned [] effective August 20, 2014,” and an accompanying press

release added that he had resigned “to pursue other long held personal and professional goals.”

But the current report disclosed that “[i]n accordance with the terms of his employment

agreement [] no severance or other compensation is payable to Dr. Ahn.” Ahn’s employment

agreement dated March 31, 2011, called for him to receive severance unless he was fired for

cause or resigned without good reason.

15 Nick Budnick, Galena Biopharma, Lake Sowego biotech firm under federal investigation, expected to announce CEO’s departure, The Oregonian, August 20, 2014, available at < http://www.oregonlive.com/health/index.ssf/2014/08/galena_biopharma_lake_oswego_b.html >.

61


196. Feuerstein’s source is reliable, since it accurately informed him that Ahn had been

fired for cause at an August 18 board meeting before anyone outside Galena knew that he had

left the company at all. Further, Galena’s claim that Ahn had resigned is inconsistent with Ahn’s

not receiving any severance. Finally, the claim is implausible. Ahn’s termination closely

followed the Board’s receipt of the Special Committee report blaming Ahn. And Ahn’s

termination was effective two days after he informed the Board of it; it is unlikely that a CEO

would offer or a Board accept such a short-fused termination, still less to pursue “other long-held

personal and professional goals”.

197. Thus, Ahn was fired for cause at the August 18 meeting.

iii. Kriegsman retains DreamTeam.

198. Defendant Kriegsman, a director of Galena, is also CEO and President of CytRx,

Galena’s erstwhile parent.

199. In the fall of 2013, CytRx retained DreamTeam to conduct a promotional

campaign to raise CytRx’s stock price. DreamTeam employed the same methods: blanketing

social media and publishing articles that failed to disclose that they were paid promotions to

create an impression of a broad base of supportive investors.

200. CytRx’s stock price rose from $2.25 on November 1, 2013 to $8.35 on January

30, 2014. CytRx then sold $74.5 million of its shares in an offering that closed on February 5.

201. Kriegsman signed an underwriting agreement, filed with the SEC on January 31,

2014, that provided:

No Price Stabilization or Manipulation; Compliance with Regulation M . The Company has not taken, directly or indirectly, any action designed to or that might cause or result in stabilization or manipulation of the price of the Shares or of any “reference security” (as defined in Rule 100 of Regulation M under the Exchange Act (“Regulation M” )) with respect to the Shares, whether to facilitate

62


the sale or resale of the Offered Shares or otherwise, and has taken no action which would directly or indirectly violate Regulation M. 202. On or about January 16, 2014, Kriegsman was interviewed by DreamTeam.

203. Pearson wrote several articles about CytRx and one about Galena. Before his

Galena article could obtain management approval, however, Adam Feuerstein’s article appeared.

Galena was no longer interested in Pearson’s article.

204. Kriegsman’s CytRx, however, was still interested in publishing Pearson’s paid

puff pieces. Pearson’s articles were sent to CytRx through Meyer; when Meyer returned the

articles, they were heavily edited. Using word’s track-changes feature, Pearson determined that

the edits had been made by both David Baen, CytRx’s VP of Business Development, and Lauren

Terrado – Kriegsman’s executive assistant.

iv. Galliker and Chin’s Kindred Biosciences hires DreamTeam.

205. Defendants Galliker and Chin, directors of Galena, are also CFO and CEO of

Kindred Biosciences, Inc., a company developing drugs for pets.

206

In late 2013, Kindred retained DreamTeam.

207. Kindred held its IPO on December 11, 2013, raising net $56,148,750.

208. As with Galena and CytRx, Kindred’s stock price rose dramatically during

DreamTeam’s promotion, from a close of $11.95 the day of its IPO to a high of $26.50 on

February 26, 2014.

209. In March 2014, Kindred conducted a follow-on offering, raising net proceeds of

$50.5 million, at a price of $18 per share.

210. In connection with the follow-on offering, Chin represented, in a filing made with

the SEC, that:

Neither the Company nor any of its affiliates (within the meaning of Rule 144

63


under the Securities Act) has taken, directly or indirectly, any action which constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the price of any security to facilitate the sale or resale of the Shares or to result in a violation of Regulation M under the Exchange Act. 211. Defendant Hillsberg was one of Kindred’s lead attorneys in both its IPO and its

follow-on offering.

v. Galena sues over comments and an article posted on Seeking Alpha.

212. In September 2013, Galena filed a complaint against Constantin Ioannides, the

co-inventor of one of Galena’s development-stage products. Galena claimed it had been defamed

by three comments Dr. Ioannides left on an article published on Seeking Alpha. In its complaint,

Galena alleged that “Seeking Alpha is a leading website for financial news [and it is] extremely

influential [and] relied on by market analysts, and viewed by millions of investors worldwide.”

Galena BioPharma, Inc. v. Ioannides, 13-cv-1745-HA, ¶7 (D. Or. 2013). Its opposition to Dr.

Ioannides’s motion to dismiss, Galena stated that Seeking Alpha “is very influential in

investment circles, particularly the bio-tech sector.” Ioannides Dkt. # 19, at 5. Christopher Lilly,

a senior attorney at the law firm TroyGould, similarly declared that Seeking Alpha “is very

influential in investment circles, particularly the bio-tech sector.” Ioannides Dkt. # 22, at ¶ 2. Mr.

Lilly and Defendant Hillsberg both work out of TroyGould’s sole office..

213. Galena’s complaint and briefs attached numerous articles from Seeking Alpha,

each of which made the Seeking Alpha Disclosure. (Compl. Ex. B; Ioannides Dkt #22-1 at 1; #

22-14 at 1; 22-16 at 4). Indeed, it is clear that Galena was monitoring Seeking Alpha. The very

day an article was published there quoting Dr. Ioannides making criticisms of Galena, Galena’s

attorney sought to have him retract the quotations. Galena’s attorney stated that “Seeking Alpha

has an enormous readership and [the article containing allegedly false and misleading

64


information] will be picked up and spread even more widely.” Dkt. # 22-19, at 3. Galena’s

attorney added that “[b]y our calculations, Galena has already been damaged $20 million [] by

the article” published on Seeking Alpha. ( Ioannides Dkt. # 22-20, at 1 (emphasis in original).

214. The September 2013 suit was the second time Galena sued an analyst over a

publication in Seeking Alpha. Galena Biopharma, Inc. v. Propthink, LLC , BC 496433 (Sup. Ct.

of Cal. L.A. Cty. 2012). In the earlier suit as well, Galena reviewed a Seeking Alpha article,

which made the Seeking Alpha Disclosure, and attached it as an exhibit. ¶ 104. There, as well,

Galena was represented by Mr. Lilly, of Defendant Hillsberg’s firm.

f. Respondeat superior and agency.

215. Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein.

216. The scienter of Galena’s employees and agents, including without limitation the

Individual Defendants and the DreamTeam Defendants, is imputed to Galena under the doctrine

of respondeat superior and common law principles of agency. Galena is liable for the acts of the

DreamTeam Defendants and their employees and agents under these common law principles.

217. Galena’s CEO, Defendant Ahn, and Executive Vice-President, Defendant

Bernarda reviewed, edited and approved DreamTeam’s published articles prior to publication.

Defendants Ahn and Bernarda approved and adopted these statements with authority to act on

behalf of Galena, and were conducted within the scope of their employment as CEO and

Executive Vice-President of Galena, respectively.

218. Galena both controlled and had the right to control the actions, means, and

manner of the DreamTeam Defendants, in that in the DreamTeam Defendants’ pursuit of a

campaign to boost Galena’s stock price, Galena authorized and had the right to authorize each of

65


the promotional articles published by DreamTeam, including their complete text, and had the

right to compel the DreamTeam Defendants to deny that the promotional articles were paid

promotions.

219. The DreamTeam Defendants’ conduct occurred substantially within the time and

space limits authorized by the agency relationship, in that Galena authorized both the

DreamTeam campaign to boost Galena’s stock price and the specific articles the DreamTeam

published; the DreamTeam Defendants were motivated by a purpose to serve Galena, in that

DreamTeam was hired to draft the promotional articles and the text of the promotional articles

that were published was approved by Galena; and the fraudulent acts were of a kind that the

DreamTeam Defendants were hired to perform.

220. All of the wrongful acts complained of herein were carried out within the scope of

the Individual Defendants’ employment or DreamTeam Defendants’ agency with authorization.

221. The scienter of the Individual Defendants and DreamTeam Defendants is

similarly imputed to Galena under respondeat superior and agency principles.

222. The interests of Galena were aligned with those of the Individual Defendants and

the DreamTeam Defendants.

223. Further, throughout the Class Period, Galena sought outside investments to bolster

its financial condition. During the Class Period, Galena received proceeds of $37.5 million from

selling its stock. During the Class Period, Galena also earned more than $21 million from the

exercise of warrants and options. Defendants’ misconduct in promoting Galena stock through

DreamTeam and Lidingo allowed Galena to sell its stock to investors at prices higher than it

otherwise could have, and in many cases, absent the unlawful stock promotion, Galena could not

and would not have been able to sell its stock and receive the sale proceeds.

66


224. In addition, as officers and directors or Galena, the Individual Defendants had

apparent authority to speak on Galena’s behalf. From the perspective of third parties, it appeared

that Galena had entrusted the Individual Defendants to speak on its behalf.

225. Plaintiffs and the Class relied on the accuracy of statements the Individual

Defendants.

226. Galena is liable for statements Defendants made when they had apparent authority

to make them.

VI. LIABILITY OF THE INSIDER TRADING DEFENDANTS.

227. Item 19 of the October 11, 2013 board meeting was a discussion of Galena’s

investor relations and public relations activities, led by Defendant Bernarda. (Exh. 21).

228. Item 21 of the January 16 2014 board meeting was a discussion of Galena’s

investor relations and public relations activities, led by Defendant Bernarda. (Exh. 23).

229. At the time of both meetings, more than 90% of Galena’s investor relations

expenses were the payments to DreamTeam and Lidingo. Obviously, Bernarda discussed

DreamTeam and Lidingo’s activities at these board meetings.

230. At Galena’s January 16, 2014 Board Meeting, the Board ratified Lindingo’s

contract with Galena.

231. At the January 16 Board Meeting, Galena’s directors were provided with Galena’s

2013 earnings which constituted material non-public information.

232. The New Policy provides that “financial performance, especially quarterly and

year-end earnings” are presumptively material. The New Policy also provides that insiders may

not trade during blackout periods. (Exh. 19).

233. On December 2, Defendant Dunlap sent an email to certain Galena insiders

67


including Mark Ahn, informing them that the blackout period for officers and high-level insiders

(including each of the Insider Trading Defendants) had begun, and that the recipients must

refrain from trading in Galena stock until Galena released earnings in March, 2014. (Exh. 93).

234. On December 11, 2013, Defendant Dunlap sent another email to Defendant Ahn,

reminding him that Galena’s blackout period for officers and high level insiders had begun.

(Exh. 96).

235. On January 3, 2014, Defendant Dunlap sent an all-company email, stating that (1)

Galena was in a blackout period, and (2) insiders could not trade in Galena stock until 2 days

after its earnings were to be released, in March 2014. (Exh. 103).

236

In violation of company policy, the Insider Trading Defendants sold company

stock:

(a) While in the possession of material non-public information, namely knowing

Galena’s 2013 earnings and knowing that Galena was engaged in a campaign to pump its stock

price (the “Inside Information”);

(b) During a blackout period.

237

Loss causation is established with respect to the Insider Trading claims because

the Inside Information provided to the Insider Trading Defendants (a) was material, and (b) the

Insider Trading Defendants actually used such information in selling Galena stock.

238. Had the Inside Information been disclosed, Galena stock would have traded at

lower prices, and Plaintiffs would not have bought their Galena shares, would have delayed

purchasing, or would have purchased at lower prices.

239. Nondisclosure of the Inside Information by Insider Trading Defendants in breach

of their duty to disclose or abstain from trading on it therefore caused Plaintiffs’ economic loss.

68


240. Loss causation is further established because the value of Galena securities

materially decreased when the Inside Information was later disclosed to the market, as set forth

in ¶¶137-150, above.

241. As a direct result of their illegal sales based on the Inside Information, the Insider

Trading Defendants avoided losses suffered by other Galena investors following the disclosure

of (a) the illegal DreamTeam campaign to pump Galena’s stock, including disclosure of receipt

of an SEC subpoena, and (b) Galena’s earnings. Following these disclosures, Galena’s stock

price fell to $2.82.

242. Based on Plaintiffs’ analysis to date, which is ongoing, as a result of the trades

conducted during the Class Period, Defendants avoided losses in Galena securities as follows:

(a) Kriegsman: $2,128,500;

(b) Ahn: $1,601,497.65;

(c) Hillsberg: $1,469,500;

(d) Chin: $489,375;

(e) Galliker: $408,000;

(f) Nisi: $1,431,000; and

(g) Schwartz: $275,000.

VII. CLASS ACTION ALLEGATIONS

243. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a class consisting of all purchasers of the securities of

Galena during the Class Period (the “Class”). Excluded from the Class are defendants and their

families, the officers and directors of the Company, at all relevant times, members of their

69


immediate families and their legal representatives, heirs, successors or assigns and any entity in

which defendants have or had a controlling interest.

244. The members of the Class are so numerous that joinder of all members is

impracticable. Throughout the Class Period, Galena common stock and other publicly traded

securities were actively traded on the NASDAQ. While the exact number of Class members is

unknown to Plaintiffs at this time and can only be ascertained through appropriate discovery,

Plaintiffs believe that there are hundreds or thousands of members in the proposed Class. Record

owners and other members of the Class may be identified from records maintained by Galena or

its transfer agent, or brokers and nominees, and may be notified of the pendency of this action by

mail, using the form of notice similar to that customarily used in securities class actions.

245. Plaintiffs’ claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants’ wrongful conduct in violation of

federal law that is complained of herein.

246. Plaintiffs will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

247. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the

questions of law and fact common to the Class are:

(a) whether the Exchange Act was violated by defendants as alleged herein;

(b) whether statements made by defendants misrepresented material facts

about the business, operations and management of Galena; and

(c) to what extent the members of the Class have sustained damages and the

proper measure of damages.

70


248. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

VIII. APPLICATION OF PRESUMPTION OF RELIANCE: FRAUD ON THE

MARKET

249. Plaintiffs will rely upon the presumption of reliance established by the fraud on

the market doctrine in that, among other things:

(a) Defendants made public misrepresentations or failed to disclose material

facts during the Class Period;

(b) The omissions and misrepresentations were material;

(c) The Company’s stock traded in an efficient market;

(d) The misrepresentations alleged would tend to induce a reasonable

investor to misjudge the value of the Company’s stock; and

(e) Plaintiffs and other members of the Class purchased Galena common

stock between the time defendants misrepresented or failed to disclose material facts and the

time the true facts were disclosed, without knowledge of the misrepresented or omitted facts.

250. At all relevant times, the market for Galena common stock was efficient for the

following reasons, among others:

(a) Galena’s shares traded on the NASDAQ;

71


(b) As a regulated issuer, Galena filed periodic public reports with the SEC;

(c) Galena regularly communicated with public investors via established

market communication mechanisms, including through regular disseminations of press releases

on the major news wire services and through other wide-ranging public disclosures, such as

communications with the financial press, securities analysts, and other similar reporting services.

(d) During the Class Period, the average weekly trading volume in Galena’s

shares as a percentage of its outstanding shares was 4.7%, establishing a very strong presumption

that the market for its stock was efficient;

(e) Galena was eligible to file and did file a short-form registration statement

with the SEC on Form S-3;

(f) Galena was followed by analysts at Cantor Fitzgerald, Needham & Co.,

Roth Capital Partners, JMP Securities, Noble Financial Group, Piper Jaffray, MLV & Co.,

Maxim Group LLC, Oppenheimer & Co., and EVA Dimensions, that issued reports about the

Company;

(g) New company specific information was rapidly reflected in the

Company’s stock price; and

(h) More than one hundred market makers made a market in the Company’s

stock.

FIRST CLAIM

Violation of Section 10(b) Of The Exchange Act

and Rule 10b-5(b) Promulgated Thereunder

Against Galena, the DreamTeam Defendants, and the Galena Officer Defendants 251. Plaintiffs repeat and reallege each and every allegation contained above as if fully

72


set forth herein.

252. This cause of action is asserted against Galena, the DreamTeam Defendants, and

the Galena Officer Defendants.

253. During the Class Period, Defendants named in this count carried out a plan,

scheme and course of conduct which was intended to, and throughout the Class Period, did: (1)

deceive the investing public, including Plaintiffs and other Class members, as alleged herein; and

(2) cause Plaintiffs and other members of the Class to purchase and/or sell Galena’s securities at

artificially inflated and distorted prices. In furtherance of this unlawful scheme, plan and course

of conduct, the Defendants made the false statements alleged herein.

254. The Defendants named in this count, directly and indirectly, by the use, means or

instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to misrepresent the true financial condition or Galena and conceal

adverse material information about the business, operations and future prospects of Galena as

specified herein.

255. The Defendants named in this count employed devices, schemes and artifices to

defraud, while in possession of material adverse non-public information and engaged in acts,

practices, and a course of conduct as alleged herein in an effort to assure investors of Galena’s

revenue, income, value and performance and continued substantial growth, which included the

making of, or the participation in the making of, untrue statements of material facts and omitting

to state material facts necessary in order to make the statements made about Galena and its

business operations and financial condition in light of the circumstances under which they were

made, not misleading, as set forth more particularly herein, and engaged in transactions,

practices and a course of business that operated as a fraud and deceit upon the purchasers Galena

73


securities during the Class Period.

256. The Defendants named in this count had actual knowledge of the

misrepresentations and omissions of material facts set forth herein, or acted with reckless

disregard for the truth in that they failed to ascertain and to disclose such facts, even though such

facts were available to them. The material misrepresentations and/or omissions made by the

Defendants named in this count were done knowingly or recklessly and for the purpose and

effect of concealing Galena’s financial condition from the investing public and supporting the

artificially inflated price of its securities. As demonstrated by the false and misleading statements

during the Class Period of the Defendants named in this count, if they did not have actual

knowledge of the misrepresentations and omissions alleged, were highly reckless in failing to

obtain such knowledge by failing to take steps necessary to discover whether those statements

were false or misleading.

257. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price for Galena’s securities

was artificially inflated during the Class Period.

258. In ignorance of the fact that market prices of Galena’s publicly-traded securities

were artificially inflated or distorted, and relying directly or indirectly on the false and

misleading statements made by defendants, or upon the integrity of the market in which the

Company’s securities trade, and/or on the absence of material adverse information that was

known to or recklessly disregarded by the Defendants named in this count but not disclosed in

public statements by defendants during the Class Period, Plaintiffs and the other members of the

Class acquired Galena’s securities during the Class Period at artificially high prices and were

damaged thereby.

74


259. At the time of said misrepresentations and omissions, Plaintiffs and other

members of the Class were ignorant of their falsity, and believed them to be true. Had Plaintiffs

and the other members of the Class and the marketplace known the truth regarding Galena’s

financial results and condition, Plaintiffs and other members of the Class would not have

purchased or otherwise acquired Galena’s securities, or, if they had acquired such securities

during the Class Period, they would not have done so at the artificially inflated prices or distorted

prices at which they did.

260. By virtue of the foregoing, the Defendants named in this count have violated

Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder.

261. As a direct and proximate result of the wrongful conduct of the Defendants named

in this count, Plaintiffs and the other members of the Class suffered damages in connection with

their respective purchases and sales of the Company’s securities during the Class Period.

262. This action was filed within two years of discovery of the fraud and within five

years of Plaintiffs’ purchases of securities giving rise to the cause of action.

SECOND CLAIM

Violation of Section 20(a) Of The Exchange Act

Against All Defendants except DreamTeam 263. Plaintiffs repeat and reallege each and every allegation contained above as if fully

set forth herein.

264. Defendants named in this count acted as controlling persons of DreamTeam

and/or Galena within the meaning of Section 20(a) of the Exchange Act as alleged herein. By

virtue of their high-level positions, agency, ownership and contractual rights, and participation in

and/or awareness of DreamTeam and/or Galena’s operations and/or intimate knowledge of the

75


false financial statements filed by the Company with the SEC and disseminated to the investing

public and/or the materially false statements made by or at the direction of DreamTeam,

Defendants named in this count had the power to influence and control, and did influence and

control, directly or indirectly, the decision-making of Galena and/or DreamTeam, including the

content and dissemination of the various statements that Plaintiffs contend are false and

misleading. Defendants named in this count were provided with or had unlimited access to

copies of the Company’s reports, press releases, public filings and other statements alleged by

Plaintiffs to have been misleading prior to and/or shortly after these statements were issued and

had the ability to prevent the issuance of the statements or to cause the statements to be

corrected.

265. In particular, Defendants named in this count had direct and supervisory

involvement in the day-to-day operations of Galena and/or DreamTeam and, therefore, is

presumed to have had the power to control or influence the particular transactions giving rise to

the securities violations as alleged herein, and exercised the same.

266. As set forth above, Galena and DreamTeam each violated Section 10(b), and Rule

10b-5 promulgated thereunder, by their acts and omissions as alleged in this Complaint.

267. By virtue of their positions as controlling persons, the Defendants named in this

count are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result

of Defendants’ wrongful conduct, Plaintiffs and other members of the Class suffered damages in

connection with their purchases of the Company’s securities during the Class Period.

268. This action was filed within two years of discovery of the fraud and within five

years of each Plaintiffs’ purchases of securities giving rise to the cause of action.

THIRD CLAIM

76


Violation of Section 20A of the Exchange Act

Against the Insider Trading Defendants


set forth herein.

270. This claim is brought against the Insider Trading Defendants under Section 20A

of the Exchange Act, 15. U.S.C. 78t-1.

271. The Inside Information provided to the Insider Trading Defendants was, in each

case, material and nonpublic. In addition, the information was, in each case, considered highly

confidential by Galena.

272. By virtue of the foregoing, Defendants, in connection with the purchase or sale of

securities, by the use of the means or instrumentalities of interstate commerce, or of the mails, or

a facility of a national securities exchange, directly or indirectly, made material omissions.

273. Insider Trading Defendants thereby violated Section 10(b) of the Exchange Act,

15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5.

274. Plaintiffs contemporaneously purchased and sold securities of the same class as

those sold and purchased by the SAC Defendants.

275. Plaintiffs are entitled to disgorgement of the unlawful gains made by the Insider

Trading Defendants.

FOURTH CLAIM

Violation of Section 10(b) of the Exchange Act and SEC Rule 10b-5

Against the Insider Trading Defendants


set forth herein.

77


277. This claim is brought against the Insider Trading Defendants under Section 10(b)

of the Exchange Act, 15 U.S.C. 78j(b), and SEC Rule 10b-5, 17 C.F.R. 240.10b-5.

278. The Inside Information provided to the Insider Trading Defendants was, in each

case, material and nonpublic. In addition, the information was, in each case, considered highly

confidential by Galena.

279. By virtue of the foregoing, Defendants, in connection with the purchase or sale of

securities, by the use of the means or instrumentalities of interstate commerce, or of the mails, or

a facility of a national securities exchange, directly or indirectly, made material omissions.

280. Insider Trading Defendants thereby violated Section 10(b) of the Exchange Act,

15 U.S.C. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5.

281. Plaintiffs contemporaneously purchased and sold securities of the same class as

those sold and purchased by the SAC Defendants.

282. Plaintiffs are entitled to disgorgement of the unlawful gains made by the Insider

Trading Defendants.

WHEREFORE , Plaintiffs pray for relief and judgment, as follows:

(a) Determining that this action is a proper class action, certifying Plaintiffs as a class

representative under Rule 23 of the Federal Rules of Civil Procedure and Plaintiffs’

counsel as Class Counsel;

(b) Awarding compensatory damages in favor of Plaintiffs and the other Class members

against all Defendants, jointly and severally, for all damages sustained as a result of

Defendants’ wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiffs and the Class their reasonable costs and expenses incurred in this

action, including counsel fees and expert fees; and

78


(d) Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiffs hereby demand a trial by jury.

Dated: October 31, 2014 Respectfully submitted,

POMERANTZ LLP Jeremy A. Lieberman (pro hac vice) Francis McConville (pro hac vice) Lesley F. Portnoy (pro hac vice) 600 Third Avenue, 20th Floor New York, NY 10016 Tel: 212-661-1100

-and-

/s/ Phillip Kim (pro hac vice) THE ROSEN LAW FIRM, P.A. Laurence M. Rosen (pro hac vice) Phillip Kim (pro hac vice) 275 Madison Avenue, 34th Floor New York, NY 10016 Phone: (212) 686-1060 Fax: (212) 202-3827 Email: [email protected]

Co-Lead Counsel for Plaintiffs

RANSOM, GILBERTSON, MARTIN & RATLIFF, L.L.P. Jeffrey Ratliff 1500 NE Irving Street, Suite 412 Portland, Oregon 97232 Tel: 503-226-3664

Liaison Counsel for Lead Plaintiffs and the Class

79


CERTIFICATE OF SERVICE

I HEREBY CERTIFY that I electronically filed the foregoing with the Clerk of Court

using the CM/ECF system which will send a notice of electronic filing to all counsel of record

who have consented to electronic notification. I further certify that I mailed the foregoing

document and the notice of electronic filing by first-class mail to all non-CM/ECF participants.

DATED : October 31, 2014

/s/ Phillip Kim

80


Certification and Authorization of Named Plaintiff Pursuant to

Federal Securities Laws

The individual or institution listed below (the "Plaintiff") authorizes and, upon execution of the

accompanying retainer agreement by The Rosen Law Firm P.A., retains The Rosen Law Firm P.A.

to file an action under the federal securities laws to recover damages and to seek other relief

against Galena Biopharma, Inc.. The Rosen Law Firm P.A. will prosecute the action on a contingent

fee basis and will advance all costs and expenses. The Galena Biopharma, Inc.. Retention Agreement provided to the Plaintiff is incorporated by reference, upon execution by The Rosen Law

Firm P.A.

First name: Middle initial: Last name: Address: City: State: Zip: Country: Facsimile: Phone: Email:

Plaintiff certifies that:

Alan

Theriault

1. Plaintiff has reviewed the complaint and authorized its filing.

2. Plaintiff did not acquire the security that is the subject of this action at the direction of plaintiff's

counsel or in order to participate in this private action or any other litigation under the federal

securities laws.

3. Plaintiff is willing to serve as a representative party on behalf of a class, including providing

testimony at deposition and trial, if necessary.

4. Plaintiff represents and warrants that he/she/it is fully authorized to enter into and execute this

certification.

5. Plaintiff will not accept any payment for serving as a representative party on behalf of the class

beyond the Plaintiff's pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or

approved by the court.

6. Plaintiff has made no transaction(s) during the Class Period in the debt or equity securities that

are the subject of this action except those set forth below:

Acquisitions:

Type of Security Common Stock

Common Stock12/04/2013 Common Stock12/04/2013 Common Stock12/06/2013 Common Stock12/20/2013 Common Stock12/20/2013 Common Stock01/06/2014 Common Stock01/06/2014 Common Stock01/09/2014 Common Stock01/15/2014 Common Stock01/15/2014

Buy Date 12/02/2013 1800 200 1000 1400 100 2600 400 1000 1500 500

# of Shares 3000 4.59 4.59 4.59 4.11 4.11 5.19 5.19 5.84 6.79 6.81

Price per Share 4.25


of 82

Certification for Alan Theriault (cont.)

Common Stock01/16/2014

5000

7.20 Common Stock01/17/2014

2000


2000


4800


4700


4700


4500


400


300


300


200


100


5000

5.34 Common Stock02/03/20145

5000


1000

4.008

Sales:

Type of Security

Common Stock12/3/2013 Common Stock12/03/2013 Common Stock12/16/2013 Common Stock12/16/2013 Common Stock12/20/2013 Common Stock01/14/2014 Common Stock01/14/2014 Common Stock01/23/2014

Sale Date

1200 1800 100 3900 2000 2000 3600 30000

# of Shares Price per Share

4.48 4.48 4.00 4.00 4.11 6.91 6.95 5.86

7. I have not served as a representative party on behalf of a class under the federal security laws

during the last three years, except if detailed below. [ ]

I declare under penalty of perjury, under the laws of the United States, that the information entered is accurate:

YES

By clicking on the button below, I intend to sign and execute this agreement and retain the Rosen Law Firm, P.A. to

proceed on Plaintiff's behalf, on a contingent fee basis. YES

Signed pursuant to California Civil Code Section 1633.1, et seq. - and the Uniform Electronic

Transactions Act as adopted by the various states and territories of the United States.

Date of signing: 05/02/2014

In re: Galena Biopharma, Inc. Securities Litigation 14-CV-00367 ...

Documents

Transcript of In re: Galena Biopharma, Inc. Securities Litigation 14-CV-00367 ...