By Contributing Editor: Jay Thompson

Note: This is Part 2 in a series of research articles addressing misrepresentations and seemingly intentional false statements made by the "Pump Stopper" and other short sellers. SkyTides plans to expand this series with additional research, management Q&A and notes in the future. If your company has been attacked by a short seller and has been the victim of misrepresentations and false statements please contact Jaja Dela Cruz at jaja@skytides.com.

In 1989, Tim Berners-Lee invented the World Wide Web (the “Internet”).   The benefits the Internet brought forth are clearly too long to list.  However, as with any new invention, there will be negative consequences.  This article will focus on the use of anonymity and intentional false statements on the Internet for personal gain, to the detriment of others.

“If its on the Internet it must be true.”

Each of us are human and each of us makes mistakes every day.  Therefore, there is no doubt that content is published on the Internet every day that is false.  Furthermore, anonymity provides individuals with the opportunity to make false, malicious and manipulative statements on purpose – perhaps to further their own cause.  Since June 10, 2014, an individual operating www.pumpstopper.com appears to have taken advantage of the anonymity of the Internet to make false statements with a negative context against U.S. public companies (“Pubco”) and certain individuals associated with Pubcos.  While making these false statements, this individual has disclosed that they are trading Pubco stock and may benefit if the Pubco stock declines in value.

Source: http://pumpstopper.com/?page_id=32

It appears likely this individual has succeeded and has profited nicely as their false statements have caused a variety of Pubco stocks to decline in value which likely resulted in substantial profits from short selling the stock ahead of the release of articles that included false statements.  A disclaimer on their website makes one thing very clear to us.  The statements the Pump Stopper makes show absolutely no concern for the accuracy of the statements made on the website.  Although some of the disclaimers used by other short sellers may make some of the same statements included within the Pump Stopper disclaimer, it is rare that a short seller is so blunt to say that comments in their articles “must not be construed as facts.”  This should be alarming to investors to say the least and should cause the reader to question every word published at www.pumpstopper.com.

Source: http://pumpstopper.com/?page_id=32

Although the Pump Stopper claims that their statements should not be construed as facts they use declaratory phrases such as “is” and “are” throughout their articles.  These phrases generally precede or are included within a definitive or factual statement – but as the Pump Stopper says, these statements shouldn’t be construed as facts.  Further, websites that provide commentary and opinions almost invariably offer the reader the ability to comment on the content published on the website.  The content at www.pumpstopper.com provides no such ability to comment on an article published on the website.  As a result, any inaccuracy or intended false statements within the website’s content can not be refuted or explained for the benefit of both the readers of the content, the Pubcos, and the individuals targeted within the content.  It is our belief that the actions of the Pump Stopper will ultimately attract the attention of the U.S. Securities and Exchange Commission, the Department of Justice and possibly the attorney generals of a variety of states where companies, associated individuals and also investors may have been harmed by the Pump Stopper’s false statements.
 

CBMG Short Attack

Cellular Biomedicine Group, Inc. (“CBMG”) and a variety of individuals associated with CBMG were attacked by the Pump Stopper in an article published on April 8, 2015 (the “CBMG Short Attack”). The CBMG Short Attack was also published at www.seekingalpha.com.  CBMG’s stock recovered since the CBMG Short Attack then dipped lower this past month - likely as a result of the recent turmoil in China's mainland stock exchanges.  On April 7, 2015, CBMG’s stock closed at $25.22.  The stock traded as low as $21.41 on April 8, 2015 and closed at $27.95 on July 31, 2015.  We believe the recovery by CBMG's stock is a direct result of investors determining that the CBMG Short Attack was baseless in many respects and that the individuals attacked by the Pump Stopper were in fact misrepresented by the Pump Stopper to an alarming degree.

We contacted CBMG’s founders with the intention of obtaining additional information to include within this article.  In July 2015, several individuals associated with CBMG, including both co-founders of CBMG, Dr. Shu Li and Mr. Derek Muhs, provided us with documentation related to the CBMG Short Attack.  SkyTides has reviewed the documentation received from the individuals, collected additional information and facts, and formed our own conclusions with regard to specific statements made in the CBMG Short Attack, and conducted interviews with Dr. Li and Mr. Muhs to corroborate the documentation we received.  We believe the primary allegations against CBMG and the individuals associated with CBMG that alarmed investors the most were the topics outlined by the Pump Stopper as follows: 

1. “CBMG Car-T technology…is worthless”
2. "CBMG's autologous SVF knee treatment is worthless"
3. “Partnered with John Mattera who is currently serving 11 years in prison for fraud (again).”
4. “CBMG founders face dishonesty allegations”
5. Personal attack on Shu Li and current executives

CAR-T

According to CBMG’s website, CBMG’s assets include Chimeric Antigen Receptor T cell (“CAR-T”) CD19, CD20, CD30 and EGFR therapies, as seen below.

The CBMG Short Attack focused on flawed research by the Pump Stopper – which appears to be intentionally manipulative.  The Pump Stopper spent approximately two pages of its report discussing known issues with CD33 therapy.  We are unaware of any documentation that suggests CBMG owns or is developing any technology associated with CD33.  We view the entire discussion about CBMG’s CAR-T therapies as meaningless, and as an intentional misrepresentation of facts for the financial benefit of a short seller and their associates.

A website has been developed to refute the Pump Stopper’s articles and expose its true objectives.  We note this website, www.pumpstopper.org agrees with our analysis and supports our findings that the Pump Stopper’s claims regarding CBMG’s CAR-T therapies are baseless.

Source: www.pumpstopper.org

In addition, Pump Stopper’s claims that CAR-T therapy is “worthless” is subjective, and again, we do not know how he/she has the credentials to make this claim. The scientific merit of CAR-T therapy has been well publicized by major science and medical publications. Science Magazine editors named cancer immunotherapy as Breakthrough of the Year for 2013, stating that “The results have raised hope that immunotherapy may give doctors new options for treatment in the future."  In addition, the National Cancer Institute has a comprehensive explanation of CAR-T therapy and the promise it has shown, quoting a Nature Reviews Clinical Oncology article by Steven Rosenberg, M.D., Ph.D., “CAR T-cell therapy eventually may “become a standard therapy for some B-cell malignancies” like acute lymphoblastic leukemia (ALL) and chronic lymphocytic leukemia.”

SVF Knee Treatment

Similar to the Pump Stopper's claims about CBMG's CAR-T technology, the CBMG Short Attack claimed that CBMG's SVF Knee Treatment was worthless as well.

It is unclear why the Pump Stopper believes CBMG's technology is based on Stromal Vasclar Fraction ("SVF") therapy - or perhaps again, the Pump Stopper has intentionally misrepresented CBMG's technology.  CBMG states the following on its website:

This disclosure on CBMG's website appears to clearly describe the technology and how it differs from SVF. CBMG has never, as far as we can tell reading through their past SEC filings and presentations, claimed that their treatment for knee osteoarthritis is “SVF” - autologous (stem cells derived from patient’s own body), yes - but not SVF.  On March 25, 2015, CBMG reported positive results including increase in cartilage volume from their Phase 1/2a and Phase 2b clinical trials for this knee therapy.  CBMG's clinical trials for this technology are registered with the U.S. National Institute of Health ("NIH") with identifier number NCT02162693 and can be viewed here.  Again, we do not know the background of the Pump Stopper so we unable to determine if they have any experience or qualifications to analyze and form an opinion on the differences between various knee injection therapies.  It appears likely the Pump Stopper had no intention of accurately describing CBMG's technology.  The Pump Stopper was more interested in profiting from its short position in CBMG's stock.

John Mattera

The following is a transcript of the interviews SkyTides conducted on August 4, 2015 with CBMG Founders Dr. Li and Mr. Muhs.

Q.    SkyTides - Dr. Li, please explain in detail what your relationship is or was with Mr. John Mattera.

A.    Dr. Li  – John Mattera was never an officer or director or board member of CBMG or WA Healthcare (“WA”) at any time, nor was he offered such a position by these entities or anyone associated with them.  Neither Mr. Mattera nor any fund associated with him invested in CBMG or WA at any time.  Mr. Mattera visited WA’s facility in Shanghai, PRC on August 21, 2011, with his wife Dr. Lan Mattera.  Mr. Mattera requested a photo be taken at that time after a routine tour of the facility.  The executives  who were present at the time agreed to take a photo with Mr. Mattera.  This was his only visit to our clinic and it did not last more than 1 hour.  Mr. Mattera requested the opportunity to invest in our company.  However after a short period of due diligence on Mr. Mattera thereafter, CBMG and WA elected to discontinue their communications with him.  Subsequently, without the approval of CBMG and WA, Mr. Mattera published four (4) press releases suggesting that his company, Xen XI Capital Ltd. had invested in WA and that CBMG was “honored to work with John Mattera.”  These press releases were false, fraudulent, misleading and were never approved by CBMG, WA or any individuals associated with either entity.  Mr. Mattera is now in prison as a result of another fraudulent scheme he committed.  We have no relationship with him and our company was a target of his fraud, never a partner.  History shows he misrepresented ownership in much larger companies than us including Facebook, Groupon & Zynga.

Q.    SkyTides – Did CBMG or WA contact Mr. Mattera about these press releases?

A.    Mr. Muhs - Yes.  We contacted Mr. Mattera in a series of emails.  You are welcome to publish these emails.

Below, we are providing images of the various emails from WA's legal department to Mr. Mattera.  We believe these emails prove Mr. Mattera was running a fraudulent scheme to suggest that he was somehow involved with WA when this clearly was not the case at all.  The CBMG Short Attack suggested that Mr. Mattera was claiming he was involved with, and had invested in, CBMG.  We are not aware of any statements, press releases or documentation that support these claims about CBMG.  There is nothing to suggest that Mr. Mattera ever made any claims about CBMG.  We believe, yet again, that there was an intentional manipulation by the Pump Stopper.

Q. SkyTides – Did CBMG or WA contact the press release distribution service to have Mr. Mattera’s press releases removed?

A. Mr. Muhs - Yes.  We contacted GlobeNewswire.  We presented many of the same facts we are discussing with you now.  GlobeNewswire deleted all of Mr. Mattera's fraudulent press releases.

GlobeNewswire is a subsidiary news agency of The NASDAQ, Inc.  When presented with the facts, it appears GlobeNewswire removed Mr. Mattera’s false press releases.  On August 27, 2015, SkyTides searched for these press releases and was unable to locate them.  We believe the email records presented above and GlobeNewswire’s actions provide substantial evidence that Mr. Mattera did not have a relationship with CBMG and that all of his claims in the since deleted press releases are baseless.

Q. SkyTides – Did CBMG or WA contact Seeking Alpha to have the CBMG Short Attack, which was also originally published at www.seekingalpha.com, removed from the Seeking Alpha site?

A. Mr. Muhs - Yes.  We contacted Seeking Alpha and provided them with much of the same information we are providing to you now.  Seeking Alpha has since removed the CBMG Short Attack from its website.

Dishonesty Allegations

The CBMG Short Attack also focused on Mr. Muh's role at M1NT Shanghai, a restaurant/lounge & private members club in downtown Shanghai.  The CBMG Short Attack claimed that Mr. Muhs was a salesperson at M1NT and was disruptive to the business, among other things.

Q.  SkyTides – Please explain what your role was at M1NT, and would you be willing to share any information on your remuneration?

A.   Mr. Muhs - Prior to M1NT opening I was the Director of Investor Relations and later Managing Director.   My primary focus was to secure sufficient funding to complete the project and manage investor relations.  Following the opening I stepped into the Managing Director role until the right long term candidate was found.  I will not dignify an anonymous Pump Stopper author with details of my compensation; however I will confirm that when I resigned from M1NT I had received a stock award of 5.125% of the total company shares.  

SkyTides has received copies of a M1INT share certificate issued to Mr. Muhs that corroborates Mr. Muhs statement above.  Below, we are providing images of M1NT and some of the awards and accolades won by M1NT in the past  These images were taken from M1NT’s website at www.m1ntshanghai.com

Q.  SkyTides – Is M1NT aware of the statements made about you in the CBMG Short Attack?

A.  Mr. Muhs - Yes. M1NT’s CEO, Mr. Nichola Brienza, has provided a letter to clarify and confirm my involvement with M1NT.
 

The suggestions that Mr. Muhs was a just a salesperson at M1NT and that he caused disruption to the business simply do not pass the smell test.  The letter from Mr. Brienza further reinforces the absurdity of the statements included within the CBMG Short Attack.  Our research uncovered numerous media references to Mr. Muhs playing a significant role for M1NT.  Mr. Muhs is shown in the visuals below to have addressed the audience at major events on behalf of M1NT, namely the first TEDx event in Shanghai, and also hosted private events at M1NT for the Shanghai International Film Festival ("SIFF").

Source: http://www.newyorksocialdiary.com/across-the-nationacross-the-world/2010...

Derek Muhs with Oscar Winner Halle Barry at Private Reception at M1NT

Derek Muhs with Yue Sai Kan (Emmy winning TV celebrity, top 50 most powerful business people in China according to Forbes) photo taken at Gary Player Charity Gala

Derek Muhs hosting Oscar winning film Director Danny Boyle & Hollywood Actress Andie MacDowell at M1NT for the 2008 Shanghai Film Festival

Our research suggests that Mr. Muhs is a successful entrepreneur who has delivered positive results and return on investment for shareholders across several industries and within both the European and Asian markets, respectively. The allegations made by the Pump Stopper appear baseless, and include multiple dramatic and seemingly intentional misstatements of facts.  We note just a few weeks ago, Mr. Muhs was recognized by industry leaders in Asia for excellence in Marketing & Brand Building.  He won the award for “Best Brand in Health Care at the 6th annual CMO Asia Awards held on August 11, 2015 in Singapore on behalf of WA Health Care.

Personal Attacks on Dr. Shu Li

The CBMG Short Attack attempts to attack the intellectual abilities of Shu Li.  We consider this a petty attack that is baseless given that the Pump Stopper is anonymous and may not have any intellectual abilities themselves.  It is surely questionable if the anonymous author has any qualifications whatsoever to dissect and analyze U.S. patent filings, and determine whether certain scientific theories are viable or not.

Q.  SkyTides – Dr. Li, would you like to provide an overview of your background and achievements?

A.  Dr. Li - Yes.  Although I'm not a scientist, rather a career business executive, academically I hold a total of 6 patents, published broadly in international top line peer reviewed journals such as IEEE Transactions, Automatica, Computer, Mathematics with Applications, and lectured internationally including at TEDx.  I obtained my Ph.D from Harvard University, M.S. at the University of Illinois Urbana-Champaign.  I'm a member of the Committee 100.

We note the Committee 100 is a prestigious group to be associated with.  According to their website, “The Committee 100 is described as a membership organization of Chinese Americans dedicated to the spirit of excellence and achievement in America.”  Current members include I.M. Pei, master architect; Yo-Yo Ma, renowned cellist; Steve Chen, co-founder of YouTube; Leroy Chiao, NASA Astronaut; David Ho, AIDS researcher and 1996 Time Man of the Year; and Michelle Kwan, figure skating champion. Membership to the Committee of 100 is by invitation and nomination only.

We confirmed through the Committee of 100 website that Dr. Li is a member.
 

We consider the attacks on Dr. Li to be petty, intentionally non-factual, and manipulative.  Our research indicates that Dr. Li is an accomplished entrepreneur with a highly successful track record.  CBMG's current management, as well as Dr. Li and Mr. Muhs, as founders of CBMG and WA respectively, are credited with organizing and developing CBMG.  CBMG successfully listed on the NASDAQ on June 18, 2014. CBMG’s market capitalization has ranged between $134 million and $569 million since its listing.  Dr. Li and Mr. Muhs also founded WA.  On March 6, 2015, iKang Healthcare Group, Inc. (“iKang”) acquired 70% of WA.  iKang is the largest operator in China's fast growing private preventive healthcare services market, accounting for approximately 12.3% of market share in terms of revenue in 2013.  iKang’s market capitalization as of August 12, 2015 was $1.02 billion.  Both Dr. Li and Mr. Muhs appear to have represented WA at various events in the last several years and played significant roles as members of the management team.

Dr. Shu Li speaking at the Ikang & WA Health Care Merger Launch Event on April 10^th, 2015

Mr. Derek Muhs speaking at the Ikang & WA Health Care Merger Launch Event on April 10th, 2015

Certain current management of CBMG were also attacked within the CBMG Short Attack.  These individuals have not communicated with us at this time.  However, we note that the current management team consists of a group of highly distinguished and qualified executives.  Their affiliations, as displayed below are more than enough to prove this statement.  Ultimately, we view these statements as baseless given the pedigree of the individuals that are being attacked and the fact that the aggressor in this instance is hiding behind their anonymity.

Source: http://www.cellbiomedgroup.com/about-us/management/

Summary

We believe the allegations included the CBMG Short Attack that have been discussed within this report are baseless.  We believe the Pump Stopper intentionally misrepresented facts for their own benefit - and their affiliates.  Further, the Pump Stopper claims no responsibility for the accuracy of their statements within the CBMG Short Attack and hides behind their anonymity.  As a result of our research, we see no reason why the Pump Stopper should be afforded any credibility with regard to their analysis of stocks or the abilities of individual members of management of any Pubco.

Additional Disclaimer:

We have no business relationship with CBMG or WA Health Care and were not compensated by CBMG or WA Health Care in connection with this article.  We do not hold any shares of CBMG as of the date of publication of this article and do not have any plans to transact in the securities of CBMG. Neither CBMG nor WA Health Care has sanctioned our work. This article and all articles included in this series about the Pump Stopper are intended to generate business relationships with other victims of short sellers.  We intend to work with other victims of short sellers who make misrepresentations and intentional false statements against individuals and public companies.