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Laurence M. Rosen, Esq. (SBN 219683)
THE ROSEN LAW FIRM, P.A.
355 South Grand Avenue, Suite 2450
Los Angeles, CA 90071
Telephone: (213) 785-2610
FacsImile: (213) 226-4684
Email: lrosen@rosenlegaLcom
Counsel for Plaintiff
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
BANGZHENG CHEN, INDIVIDUALLY
AND ON BEHALF OF ALL OTHERS
SIMILARLY SITUATED,
Plaintiff,
vs.
CO:MPLAINT
CLASS ACTION
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CYTRX CORPORATION, STEVEN A.
KRIEGSMAN, THE
DREAMTEAMGROUP, and MISSIONIR, JURY TRIAL DEMANDED
Defendants.
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Plaintiff Bangzheng Chen ("Plaintiff'), individually and on behalf of all
other persons similarly situated, by his undersigned attorneys, for his complaint
against Defendants, alleges the following based upon personal knowledge as to
himself and his own acts, and information and belief as to all other matters, based
upon, inter alia, the investigation conducted by and through his attorneys, which
included, among other things, a review of the defendants' public documents,
28 conference calls and announcements made by defendants, United States Securities
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and Exchange Commission ("SEC") filings, wire and press releases published by
and regarding CytRx Corporation ("CYTR" or the "Company"), securities analysts'
reports and advisories about the Company, and information readily obtainable on
the Internet. Plaintiff believes that substantial evidentiary support will exist for the
allegations set forth herein after a reasonable opportunity for discovery.
NATURE OF THE ACTION
1. This is a federal securities class action on behalf of a class consisting
of all persons other than Defendants who purchased the common stock of CYTR
between November 22,2013 and March 13,2014, including the Company's public
offering completed on or about February 5, 2014, seeking to recover damages
caused by Defendants' violations offederal securities laws.
JURISDICTION AND VENUE
2. The claims asserted herein arise under and pursuant to Sections ] O(b)
and 20(a) of the Securities Exchange Act, and Rule 10b-5 promulgated thereunder
(17 C.F.R. 240.l0b-5).
3. This Court has jurisdiction over the subject matter of this action
pursuant to Section 27 of the Exchange Act (15 U.S.c. 78aa) and 28 U.S.c.
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4. Venue is proper in this Judicial District pursuant to 27 of the
Exchange Act, 15 U.S.C. 78aa and 28 U.S.c. 1391(b).
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5. In connection with the acts, conduct, and other wrongs alleged in this
Complaint, Defendants, directly or indirectly, used the means and instrumentalities
of interstate commerce, including but not limited to, the United States mails,
interstate telephone communications and the facilities of the national securities
exchange.
PARTIES
6. Plaintiff, as set forth in the accompanying certification, incorporated
by reference herein, purchased CYTR securities at artificially inflated prices during
the Class Period and has been damaged thereby.
7. Defendant CYTR is a biopharmaceutical research and development
company specializing in oncology. CYTR is a Delaware Corporation
headquartered in Los Angeles, California. During the Class Period, the Company's
stock is listed on the NASDAQ under ticker "CYTR."
8. Defendant Steven A. Kriegsman ("Kriegsman") was at all relevant
times the Company's CEO, President and Director. Kriegman is also a Director of
Galena Biopharma, Inc. ("GALE" or "Galena"). Galena also hired DTG and
MissionIR to tout its stock through articles written by third parties and aliases
DTG/MissionIR themselves without disclosing tharthe articles were commissioned
and edited by GALE itself. Kriegsman sold several million dollars' worth of his
GALE stock during the misleading GALE promotion.
9. Defendants DreamTeamGroup ("DTG") and Tv1issioniR are securities
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advertisers and investor relations firms that create and execute a "strategy that
produces measurable results and attracts a wider following of investors to improve
each client's overall market valuation." DTG and MissionIR are affiliates.
PLAINTIFF'S CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action as a class action pursuant to Federal Rules
of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons
who purchased the common stock of CYTR during the Class Period and who were
damaged thereby. Excluded from the Class are Defendants, the officers and
directors of the Company at all relevant times, members of their immediate families
and their legal representatives, heirs, successors or assigns and any entity in which
defendants have or had a controlling interest.
11. The members of the Class are so numerous that joinder of all members
is impracticable. Throughout the Class Period, CYTR's securities were actively
traded on the NASDAQ. While the exact number of Class members is unknown to
Plaintiff at this time and can only be ascertained through appropriate discovery,
Plaintiff believes that there are at least hundreds of members in the proposed Class.
Members of the Class may be identified from records maintained by CYTR or its
transfer agent and may be notified of the pendency of this action by mail, using a
form of notice customarily used in securities class actions.
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12. 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.
13. Plaintiff will fairly and adequately protect the interests of the members
of the Class and has retained counsel competent and experienced in class and
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14. 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 federal securities laws were violated by Defendants'
acts as alleged herein;
(b) whether statements made by Defendants to the investing public
during the Class Period misrepresented material facts about the business, operations
and management of CYTR; and
(c) to what extent the members of the Class have sustained damages
and the proper measure of damages.
15. 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
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impossible for members of the Class to redress individually the wrongs done to
them. There will be no difficulty in the management of this action as a class action.
SUBSTANTIVE ALLEGATIONS
16. Under the direction of CYTR and Kriegsman, DTG MissionIR, and
third parties under their control began to tout CYTR stock throughout the Class
Period.
17. The purpose of this promotional campaign was to raise additional
capital, increase shareholder value, and raise visibility to the public capital market.
12 18. DTG and MissionIR conducted a massive promotional campaign,
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which included dozens of published articles or news reports and various statements
made through various social media outlets, including seekingalpha.com and Forbes.
16 19. The articles did not disclose that they were authored by paid promoters
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under the control of CYTR nor did they disclose the authors had a business
relationship with CYTR.
20 20. This misleading promotion was successful. Articles by DIG's paid
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authors Meyer and Mylant caused a steep run-up in the Company's stock price as
set forth below.
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Cytrx articles by Meyer and Mylant
Forbes article
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Nov13 Dea13 Jan14 Feb14 Mar14
21. On February 12, 2014, journalist Adam Feuerstein published an article
14 concernmg GALE on TheStreet.com, available at <
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http://v.f\vw.thestreet.com/story/12327045/1/galena-biopharn1a-pays-for-stock-
touting-campaign-while-insiders-cash-out -millions.html>. Mr . Feuerstein's article
18 is incorporated by reference. In it, Mr. Feuerstein reported that:
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GALE had paid DTG and MissionIR to tout its stock without disclosing that
the articles they published were commissioned and approved by GAlE;
DTG and MissionIR had falsely stated that the articles were written by
authors who were not paid by GALE;
Defendant Kriegsman had sold net $2.1 million of his stock while the
promotion was ongoing; and
CYTR had also retained DTG.
25 22. That day, CYTR's stock pnce fell from $6.60 to $6.04, or 8.5%,
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damaging investors.
On March 13, 2014, an article was published on seekingalpha.com
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entitled, Behind the Scenes with Dream Team, CytRx and Galena, that revealed the
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seekinglapha.com article, which IS incorporated herein by reference,
http://seekingalpha.com/article!2086173-behind-the-scenes-with-dream-team-cyirx-
and-galena?source=yahoo, provided a detailed report on the undisclosed paid
promotion. The report's findings are summarizes as follows: Shares of CYTR and
GALE both quadrupled during an undisclosed paid promotion via Dream Team.
Documents show that CYTR and GALE management edited, changed and
approved the paid articles.
At the peak of the promotion, CYTR issued S86 million in new equity while
GALE insiders sold personal stock.
Over 100 Dream Team articles have been removed from various sites in the
past two days.
At least 13 articles on CYTR alone have been removed from publication.
24. This adverse information caused the price of CytRx stock to fall from
19 $4.78!share to $4. 17!share on NIarch 13,2014.
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Applicability of Presumption of Reliance:
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Fraud-on-the-Market Doctrine
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At all relevant times, the market for CYTR's common stock was an
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efficient market for the following reasons, among others:
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(a) CYTR's stock met the requirements for listing, and is listed and
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(b) During the class period, on average, over several hundreds of thousands of
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shares of CYIR stock were traded on a weekly basis, demonstrating a very active and
4 broad market for CYIR stock and permitting a ve,y strong presumption of an efficient
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(c) As a regulated issuer, CYTR filed periodic public reports with the
SEC and was eligible and did file short form registration statements with the SEC
on Form S-3 during the Class Period;
(d) CYTR regularly communicated with public investors via established
market communication mechanisms, including through regular disseminations of
press releases on the national circuits of major newswire services and through
other wide-ranging public disclosures, such as communications with the financial
press and other similar reporting services;
(e) CYTR was followed by several securities analysts employed by
major brokerage firms who wrote reports that were distributed to the sales force
and certain customers of their respective brokerage firms during the Class
Period. Each of these reports was publicly available and entered the public
marketplace;
(f) Numerous NASD member firms were active market-makers in CYTR
stock at all times during the Class Period; and
(g) Unexpected material news about CYTR was rapidly reflected and
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26. As a result of the foregoing, the market for CYTR's common stock
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promptly digested current information regarding CYTR from all publicly available
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5 circumstances, all purchasers of CYTR's common stock during the Class Period
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suffered similar injury through their purchase of CYTR's common stock at
artificially inflated prices, and a presumption of reliance applies.
FIRST CLAIM
Violation of Section 1 O(b) Of
The Exchange Act Against and Rule lOb-5
Promulgated Thereunder Against All Defendants
27. Plaintiff repeats and realleges each and every allegation contained
16 above as if fully set forth herein.
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28. This claim is brought against all defendants. Defendant Kriegsman is
sued herein as controlling person of CYTR, DTG, and MissionIR.
29. During the Class Period, Defendants 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 plaintiff and other Class members, as
24 alleged herein; and (2) cause plaintiff and other members of the Class to purchase
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CYTR's common stock at artificially inflated prices. In furtherance of this
unlawful scheme, plan and course of conduct, Defendants, and each of them, took
the actions set forth herein.
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'''0 .) . Defendants (a) employed devices, schemes, and artifices to defraud;
(b) made untrue statements of material fact and/or omitted to state material facts
necessary to make the statements not misleading; and (c) engaged in acts, practices,
and a course of business that operated as a fraud and deceit upon the purchasers of
the Company's common stock in an effort to maintain artificially high market
prices for CYTR's common stock in violation of Section 1 O(b) of the Exchange Act
and Rule 10b-5 thereunder. All Defendants are sued either as primary participants
in the wrongful and illegal conduct charged herein or as controlling persons as
alleged below.
31. Defendants, individually and in concert, 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 conceal adverse material
information about the business, operations and future prospects of CYTR as
specified herein.
These Defendants 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 CYTR's value and performance and continued substantial grmvth, which
included the making of, or 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 CYTR and its business operations and future prospects in
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the 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 of CYTR's
common stock during the Class Period.
33. Each of the Defendants' pnmary liability, and controlling person
liability, arises from the following facts: (1) the individual defendants were high-
level executives, directors, and/or agents of the Company during the Class Period
and members of the Company's management team or had control thereof; (2) each
of these defendants, by virtue of his or her responsibilities and activities as a senior
officer and/or director of the Company, was privy to and participated in the
creation, development and reporting of the Company's financial condition; (3) each
of these defendants enjoyed significant personal contact and familiarity with the
other defendants and was advised of and had access to other members of the
Company's management team, internal reports and other data and information
about the Company's finances, operations, and sales at all relevant times; and
( 4) each of these defendants was aware of the Company's dissemination of
information to the investing public which they knew or recklessly disregarded was
materially false and misleading.
34. Defendants 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
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facts were available to them. Such Defendants' material misrepresentations and/or
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omissions were done knowingly or recklessly.
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information and failure to disclose material facts, as set forth above, the market
price of CYTR' s common stock was artificially inflated during the Class Period. In
ignorance of the fact that market prices of CYTR's publicly-traded common stock
were artificially inflated, and relying directly or indirectly on the false and
misleading statements made by Defendants, or upon the integrity of the market in
which the common stock trades, and/or on the absence of material adverse
information that was known to or recklessly disregarded by Defendants but not
disclose in public statements by Defendants during the Class Period, Plaintiff and
the other members of the Class acquired CYTR common stock during the Class
Period at artificially high prices and were or will be damaged thereby.
36. At the time of said misrepresentations and omissions, Plaintiff and
other members of the Class were ignorant of their falsity, and believed them to be
true. Had Plaintiff and the other members of the Class and the marketplace known
the truth regarding CYTR's financial results, which were not disclosed by
defendants, Plaintiff and other members of the Class would not have purchased or
otherwise acquired their CYTR common stock, or, if they had acquired such
common stock during the Class Period, they would not have done so at the
artificially inflated prices that they paid.
37. By virtue of the foregoing, Defendants have violated Section 10(b) of
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the Exchange Act, and Rule 10b-5 promulgated thereunder.
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4 38. As a direct and proximate result of Defendants' wrongful conduct,
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Plaintiff and the other members of the Class suffered damages in connection with
their respective purchases and sales of the Company's common stock during the
Class Period.
39. 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.
SECOND CLAIJ\t1
Violation of Section 20(a) Of
The Exchange Act Against
40. Plaintiff repeats and realleges each and every allegation contained
above as if fully set forth herein.
20 41. Defendant Kriegsman is sued herein as a controlling person of CYIR,
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DTG, and Mission IR.
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42. Defendant CYTR is sued herein as a controlling person of DIG and
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43. By virtue of their high-level positions, agency, and their ownership
and contractual rights, participation in and/or awareness and/or intimate knowledge
of the misleading statements disseminated to the investing public, these defendants
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had the power to influence and control, and did influence and control, directly or
indirectly, the decision-making of the primary violator, including the content and
dissemination of the various statements that plaintiff contends are false and
misleading. In particular, each defendant had the power to control or influence the
particular transactions giving rise to the securities violations as alleged herein, and
exercised the same.
44. As set forth above, CYTR, MissionIR and DTG each violated Section
1 O(b) and Rule lOb-5 by their acts and omissions as alleged in this Complaint.
45. By virtue of their positions as controlling persons, the individual
defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct
and proximate result of Defendants' wrongful conduct, Plaintiff and other members
of the Class suffered damages in connection with their purchases of the Company's
common stock during the Class Period.
46. 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.
PRAYER FOR RELIEF
24 WHEREFORE, Plaintiff prays for relief and judgment, as follows:
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(a) Determining that this action is a proper class action, designating
Plaintiff as class representative under Rule of the Federal Rules of Civil
28 Procedure and Plaintiffs counsel as Class Counsel;
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(b ) Awarding compensatory damages in favor of Plaintiff and the
other Class members against all defendants, jointly and severally, for all damages
sustained as a result of defendants' in an amount to be proven at trial,
including interest thereon;
(c) Awarding Plaintiff and the Class their reasonable costs and
8 expenses incurred in this action, including counsel fees and expert fees; and
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(d) Such other and further relief as the Court may deem just and
proper.
JURY TRIAL DEMANDED
Plaintiff hereby demands a trial by jury.
Dated: fvfarch 14,2014 Respectfully
THE ROSEN LAW FIRcl\1, P.A.

Laurence M. Rosen, Esq. (SBK 219683)
355 South Grand Avenue, Suite 2450
Los Angeles, CA 90071
Telephone: (213) 785-2610
FaCSImile: (213) 226-4684
Email: lrosen@rosenlegal.com
Counsel for Plaintiff