Two executives of a Lexington-based biopharmaceutical company have been indicted in federal court, accused of running a years-long scheme that prosecutors say misled investors about the prospects of a cancer drug that never received FDA approval.
A federal grand jury in the Eastern District of Kentucky on Wednesday charged W. Michael Putnam, the founder and president of CBA Pharma, and Louis A. Carmichael, also known as “Buzz,” with conspiracy to commit wire fraud and 10 counts of wire fraud. The indictment alleges the pair falsely told investors that the company’s experimental drug was on the verge of FDA approval — even after regulators had repeatedly rejected it and ultimately withdrawn the application.
According to the indictment, CBA Pharma was founded in the late 1990s and operated out of Lexington while pursuing approval for a drug known as CBT-1, which the company claimed could combat chemotherapy resistance in cancer patients. Federal prosecutors say the company failed to demonstrate through clinical trials that the drug was effective, a core requirement for approval.
The Food and Drug Administration issued multiple warnings over the years, including “refusal to file” letters in 2011 and a formal “complete response letter” in 2013 identifying serious deficiencies in the company’s data. Despite repeated extensions, prosecutors say CBA Pharma never completed additional clinical trials to address those concerns. In April 2023, the FDA formally withdrew the pending application.
Even so, Putnam and Carmichael are accused of telling investors in 2023 and 2024 that approval was imminent.
The indictment details a “royalty funding program” in which investors were promised payouts from future CBT-1 sales after FDA approval, with claims of returns up to 40 times their investment. Prosecutors say those solicitations were paired with emails, presentations, and in-person meetings in which the defendants described CBT-1 as being in the “final stages” of FDA review, claimed approval was likely within months, and projected billions of dollars in annual revenue.
In reality, prosecutors allege, the FDA had already withdrawn the drug application and repeatedly told the company it had not shown that CBT-1 worked. Those facts were allegedly concealed from investors.
The wire fraud counts are tied to specific emails and financial transactions sent between May and August 2023, including messages promoting the royalty program and investor payments routed through national banks.
Federal authorities are also seeking forfeiture of more than $1.8 million seized from multiple CBA Pharma-related bank accounts, according to the indictment. The government is asking for a money judgment representing the total proceeds allegedly obtained through the scheme.
If convicted, Putnam and Carmichael each face up to 20 years in prison on each count, along with potential fines, restitution, and supervised release.
The case is assigned to U.S. District Judge Gregory F. VanTatenhove and Magistrate Judge Matthew A. Stinnett. The U.S. Attorney’s Office for the Eastern District of Kentucky is prosecuting the case.
