The 3 Lies of Reven Pharmaceuticals

On December 9, 2019, Michael Volk, one of Reven’s three principals, emailed a group of investors with a status update: “We are currently undergoing our first audit now.”

The tenth circuit court determined that was a lie. Reven never began an audit. It had not even retained an auditing firm. Nearly two years later, a slide deck that Volk sent to an investment advisor said the company “has the minimum required two years of audited financial statements ending August 2021.”

The audit is one of three categories of statements the SEC says misled investors in Reven Holdings, Inc. and its affiliates. The others concern how much the principals (Brian Denomme, Peter Lange and Volk) were paid, and whether the company was facing a lawsuit. A federal district court found the SEC likely to prove all three, froze the defendants’ assets, and barred them from selling securities while the case proceeds. The Tenth Circuit has now upheld that order.

An Unapproved Drug and a Promised Exit

Reven has spent years trying to develop RJX, which the court describes as a “cardiovascular intravenous drug treatment.” The company has patents and has run research and trials, but RJX has not been approved by the Food and Drug Administration. Money for that kind of work came from private investors, who received private placement memoranda (PPMs): the disclosure documents a private company gives investors when it sells them shares.

Private shares are hard to sell. For many investors, the realistic way out is a public offering, which is why statements about going public carry weight. Lange’s September 2019 slide deck listed a public offering as the first of three possible “exit strategies.” A company cannot go public without audited financial statements, so any claim about an audit goes directly to whether and when investors could cash out.

The Audit That the Record Says Never Started

The court traced how the audit language changed. In September 2019, Lange’s deck said the company “will have” two years of audited statements ending September 30, 2020. By November 2021, the same sentence said the company “has” them, now ending August 2021. The present-tense version then went out repeatedly.

• September 9, 2019Lange emails a deck saying Reven “will have” two years of audited statements by September 30, 2020.
• December 9, 2019Volk tells investors, “We are currently undergoing our first audit now.”
• February 13, 2020Lange writes that the company decided to file an S-1 (the SEC filing for an IPO) and adds, “We have since done that.”
• July 8, 2020Lange writes that the audit should finish in mid-September or early October, which would allow an S-1 filing “sometime before the end of the year.”
• November 18 to December 16, 2021Decks sent by Lange and Volk say Reven “has” two years of audited statements ending August 2021. One went to an investment advisor who forwarded it to other advisors.
• September 14, 2022Lange sends a deck with the same representation again.

The February 2020 email and the July 2020 email do not fit together. If an S-1 had been filed in early 2020, there would be no need to wait for an audit to finish before filing one at the end of the year. The court noted that the evidence shows Reven had not filed an S-1.

The defendants argued the statements were forward-looking, and pointed to a disclaimer in the decks warning that forward-looking statements are identified by words such as “will.” The court turned that disclaimer around. Because the disclaimer defines forward-looking language by words like “will,” and because Reven removed “will have” from the key sentence, the court reasoned the disclaimer likely shows the statements were not meant as predictions. Of Volk’s December 2019 email, it wrote that “a prospective reading of this statement is simply not possible.”

Investors told the court why this mattered. One declared that the potential exit through a public offering was “an important part” of his decision to invest. Another testified that if she had known Reven was not doing what it said to prepare, she would not have invested. The court added that materiality does not depend on whether a particular investor relied on a statement; the question is whether a reasonable investor would consider it important.

Pay Disclosures That Did Not Match the Bank Records

The second category involves the PPMs’ statements about what the three principals earned. A July 2020 memorandum reported $540,000 each ($1.62 million total) for 2019 and $660,000 each ($1.98 million total) for 2020. A January 2021 memorandum reported $600,000 each ($1.8 million total) for 2020 and $720,000 each ($2.16 million total) for 2021.

The SEC’s accounting expert, Donna Walker, reviewed Reven’s Wells Fargo banking records and reached very different numbers.

Figures as described in the Tenth Circuit’s opinion. The bank-record totals are the SEC accountant’s preliminary showing. The two PPMs disagree with each other about 2020.

The district court credited a gap of $8.92 million to $9.78 million between disclosed and actual pay for 2019 through 2021. Even after accommodating the defendants’ objections to the SEC’s numbers, it found the principals took in $4.89 million to $5.75 million more than they disclosed. One more number from the first PPM matters for scale: in August 2018, Reven projected general administrative and payroll costs of about $5 million for 2019, a figure that covered more than pay. The SEC accountant found the non-compensation portion for 2019 alone came to $2,716,023.

The defendants’ main answer was that the principals’ employment agreements entitled them to even more than they received, and that investors could have asked to see those agreements. The court was not persuaded. The agreements described what the principals could be paid; they did not report what was paid, so they “provided no reason for an investor to doubt” the PPM figures. The defendants also noted that the principals often put their own money into the company. The court said neither point undercut its “commonsensical finding” that the principals knew what they were paid and what the PPMs said.

On materiality, the evidence was split. The defense produced one investor who said pay did not matter to him. The SEC produced another who said it mattered to her. Given that, and the long line of cases treating misstatements about money flowing to insiders as material, the court said it could not call the district court’s conclusion an abuse of discretion.

A Lawsuit Investors Were Told Did Not Exist

The third category involves a Florida lawsuit. On August 8, 2016, the guardian of an elderly man sued Reven Pharmaceuticals, Inc. and Lange, alleging that the man had been fraudulently induced to invest. On December 26, 2019, the complaint was amended to add Reven, LLC; Reven Holdings, Inc.; and Volk. Reven settled for $2.75 million on October 5, 2021. The plaintiff had sought damages for the ward’s entire investment, which the court put at more than $2.83 million.

Over the same years, investors received statements to the contrary:

• In February 2020, Lange wrote, “we have no lawsuits from shareholders.”
• In April 2020, Volk sent a prospective investor the 2018 PPM, calling it the “OLD Private Placement Memorandum” but writing that it would “serve as appropriate disclosure for compliance.” It said the company was “not currently the subject of any litigation.”
• In April and December 2021, Volk sent PPMs stating that management was not aware of pending litigation that would be material to the company. In the April email he called the PPM “definitely outdated.” The settlement came in between.

The defendants offered explanations. They said the suit initially named only Reven Pharmaceuticals and Lange, that Lange did not think a suit brought by a shareholder’s guardian counted, and that management believed the case was baseless. The court noted that Reven Pharmaceuticals transferred all of its assets and liabilities to Reven Holdings ten days before the first PPM was issued. That meant Reven Holdings was liable for the suit throughout, and the people who arranged the transfer would have known they were not out from under it. The district court had described Lange’s wording as “hair-splitting” and as evidence of an effort to hide the suit; the SEC pressed the same view on appeal.

How It Came to Light, and Who Was Affected

The case began with investors. Around October 15, 2022, Leah Schaatt emailed the SEC with concerns about Reven’s management and finances, and she and another investor, Lee-Ann Frost Corry, supplied information. The SEC filed a sealed complaint on December 9, 2022, charging violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (along with Rule 10b-5). It asked for emergency relief without notice to the defendants, and on January 3, 2023, the court froze their assets.

That last figure deserves care. Schaatt and Frost Corry told the court they were seeking a receiver for the benefit of “175 innocent investors who were harmed.” The district court denied their request to intervene because it found the SEC adequately represented investors’ interests, and it declined to appoint a liquidation agent to sell Reven’s assets, saying that would “effectively put [Reven] out of business entirely.” Neither ruling was challenged on appeal. The opinion does not say how much any investor lost, only that the court found a danger of further harm to current and prospective investors if the defendants could keep selling securities and moving assets.

The Freeze That Reven Says Is Destroying What It Protects

Reven’s sharpest argument was that the freeze defeated its own purpose. By blocking the company from maintaining its patents and funding drug trials, the defendants said, it was wasting patent life and “decimating (not preserving) investor assets.” They also argued that stalling RJX harmed the public, which might lose a treatment for life-threatening conditions.

The court took the argument seriously, noting it had not previously seen an asset-freeze challenge on that theory. But it found the district court had already responded. After the defendants asked, the district court allowed third parties to pay Reven’s expenses, permitted the licensing of Reven’s intellectual property, let the principals earn new income and incur new debt (with court approval) to pay for patent upkeep and legal fees, and kept an allowance for living expenses. The Tenth Circuit summarized this as letting the defendants use every means available to raise financing, short of selling securities. It also noted that the district court had approved requests to release funds promptly, sometimes the same day.

Several other points cut against Reven. The district court found the company was “in dire financial straits” before the SEC sued, so the freeze could not be blamed for all of its troubles. The only alternative Reven pressed was lifting the freeze completely, which the court said would hand control back to the same people who likely committed fraud, on the strength of a vague plan. And while the SEC did not dispute that RJX could benefit the public, the Tenth Circuit observed that Reven “never requested additional modifications” beyond total removal of the freeze. On the underlying business, the court was blunt: “At bottom, Appellants’ business is a gamble,” one with possible public benefits, and investors’ remaining assets need not be freed up to keep betting on it.

What the Tenth Circuit Actually Decided

A preliminary injunction is a court order issued early in a case to prevent harm while the case is pending. An asset freeze is a common companion in securities cases, intended to keep money available in case the court later orders repayment. The appeals court reviewed only whether the district court abused its discretion, meaning whether its decision was arbitrary or lacked a rational basis in the evidence.

The court affirmed the injunction and freeze and remanded the case, meaning it was sent back to the district court for further proceedings. Remand does not signal a change in the outcome. It reflects that the SEC’s enforcement action is still pending.

“We are currently undergoing our first audit now.”Michael Volk to investors, December 9, 2019, as quoted in the Tenth Circuit’s opinion

Source: SEC v. Reven Holdings, Inc., et al., Nos. 24-1235 and 24-1309 (10th Cir. Oct. 14, 2026) (published opinion by Chief Judge Holmes, on appeal from D. Colo. No. 1:22-CV-03181-DDD-SBP).