Pharma Startup Executives Must Fight Trimmed SEC Fraud Suit

The chief financial officer and a manager of a failed digital pharmacy company must defend against some federal regulator claims concerning overstated revenue derived from hundreds of fake prescriptions.

It’s plausible ex-CFO Robert Horowitz knowingly misstated revenue to investors, helping Medly Health Inc. raise $170 million, said Judge Brian M. Cogan in an order entered Thursday. And the Securities and Exchange Commission’s civil lawsuit adequately alleges former Rx Operations head Chintankumar Bhatt knew he entered fake prescriptions to further a scheme of deception, Cogan said while letting most of the agency’s claims proceed.

But the SEC failed to “mold” a ...