What happened

Shares of Opko Health, Inc. (NASDAQ:OPK) were down 18% as of 3:34 p.m. EDT on Friday after the Securities and Exchange Commission (SEC) charged 10 individuals, along with 10 entities associated with these individuals, with fraud. Both Opko Health and its CEO, Phillip Frost, were named in the charges. Trading of the stock was also halted. 

The SEC alleged that the individuals and entities manipulated the share prices of three companies in what are commonly referred to as "pump-and-dump" schemes. Phillip Frost was accused of participating in two of these cases of fraud.

SEC and image of SEC building in front of stock data

Image source: Getty Images.

So what

It is important to remember that the SEC's charges haven't been proven yet. Opko Health has not released a public statement about the allegations as of the time of this writing. However, the charges of fraud against the company and its CEO are very serious -- and should be taken seriously by investors.

The SEC stated that a group led by Florida investor Barry Honig manipulated the prices of three microcap stocks from 2013 through 2018. They allegedly acquired large numbers of shares of the stocks at huge discounts, aggressively promoted those stocks to boost the share prices, then sold the shares to make big profits. Opko, by the way, is not a microcap stock.

These charges came as Opko Health had begun to regain momentum this summer after the stock fell more than 40% earlier in the year. Last month, Opko reported improving financial results for the second quarter and strong prescription growth for its secondary hyperparathyroidism (SHPT) drug Rayaldee. The positive momentum has now evaporated in light of the SEC's allegations. 

Now what

What happens for Opko ultimately comes down to whether or not the charges are proven. The company and its CEO are innocent until proven guilty in a court of law. However, quite frankly, it can be a different story in the court of public opinion. 

Investors can probably expect a dark cloud to hang over Opko Health for a while. It's not likely that good news for Rayaldee or any of the company's other products will be enough to overcome the stigma of the SEC's allegations. My view is that Opko is a stock to avoid until more facts are known.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.