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EXHIBIT A
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l Ol CALIFORNIA ST. AUSTIN LONDON
SUITE 3600 BEUING MOSCOW
BAKER BOTTS L.L.P SAN FRANCISCO, CALIFORNIA
9411 l
BRUSSELS
DALLAS
NEW YORK
PALO ALTO
DUBAI RIYADH
TEL + l 415 291 6200 HONGKONG SAN FRANCISCO
FAX + l 415 291 6300 HOUSTON WASHINGTON
BakerBotts.com

August 17, 2018

Jonathan A. Shapiro
TEL: 4 152916204
INADMISSABLE: FOR SETTLEMENT PURPOSES ONLY
FAX:4152916304
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154 jonathan.shapiro@bakerbotts.com

VIA ELECTRONIC MAIL AND FEDERAL EXPRESS

Gregory Sichenzia, Esq.


Marc J. Ross, Esq.
Michael H. Ference, Esq.
Harvey Kesner, Esq.
SICHENZIA ROSS FERENCE KESNER LLP
1185 6th Avenue
New York, New York 10036

Re: Ma.bVax berapeuti cs Holdings, lnc.

Gentlemen:

As Mr. Kesner is aware, we represent Mab Vax Therapeutics Holdings, Inc. (or the
"Company"). The Company has concluded that your law firm, and Mr. Kesner individually, have
engaged in misconduct throughout the course of your representation of Mab Vax, resulting in
exceptional harm to the Company. Mab Vax is prepared to commence legal action to seek redress.
As a professional courtesy, the Company has asked us to extend to you an opportunity to resolve
this serious matter on a confidential basis prior to filing a lawsuit. I attach, for settlement purposes
only, a draft complaint that sets forth some of the facts and circumstances giving rise to the
Company's claims.

Kindly provide copies of any insurance policies that may be available to satisfy all
or part of a judgment that the Company may obtain against your law firm and Mr. Kesner.

Please let us know by the close of business on Monday, August 20, 2018, if you are
interested in achieving a confidential resolution.

Very truly yours,

/?~/'?--
Jonathan A. Shapiro

Enclosure
cc: Lynn Neils, Esq.
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 3 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 SUPERIOR COURT FOR THE STATE OF CALIFORNIA


2 COUNTY OF SAN DIEGO
3
MABVAX THERAPEUTICS HOLDINGS, Case No. 18CV__________
4 INC., a Delaware Corporation,
COMPLAINT FOR DAMAGES
5 Plaintiff,
1. BREACH OF CONTRACT
6 v. 2. MISREPRESENTATION
3. NEGLIGENT PROFESSIONAL
7 SICHENZIA ROSS FERENCE KESNER PRACTICE
LLP, a Business Entity, HARVEY KESNER, 4. FRAUD
8 and DOES 1 through 10, inclusive, 5. BREACH OF FIDUCIARY DUTY
6. RESTITUTION FOR UNJUST
9 Defendants. ENRICHMENT
10 REQUEST FOR JURY TRIAL
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28 COMPLAINT FOR DAMAGES CASE NO. 18CV______


Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 4 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 Plaintiff MABVAX THERAPEUTICS HOLDINGS, INC. (“MabVax” or “the

2 Company”) hereby files this complaint (the “Complaint”) against defendants SICHENZIA

3 ROSS FERENCE KESNER LLP (“Sichenzia”) (f/k/a Sichenzia Ross Friedman Ference LLP),

4 and HARVEY KESNER (“Kesner”) (together, “Sichenzia/Kesner”), and alleges as follows:

5 INTRODUCTION

6 1. MabVax is a clinical-stage biotechnology company that is developing treatments

7 for the most insidious cancers, such as pancreatic cancer. MabVax was founded in San Diego

8 more than a decade ago by leading pharmaceutical researchers, clinicians and entrepreneurs,

9 including the head of the Laboratory of Tumor Vaccinology at the renowned Memorial Sloan

10 Kettering Cancer Center in New York. Since then, the MabVax team has brought its promising

11 therapies into clinical trials in conjunction with traditional chemotherapy and collaborated with

12 others here and abroad in the fight to find effective treatments for cancer. Along the way,

13 MabVax matured from a local start-up financed by a few generous patrons into a public

14 company with its stock traded on the Nasdaq. The clinical research has been exhausting and

15 expensive. MabVax has pressed ahead because its progress is real, and the human stakes are so

16 high.

17 2. Sadly, of all the obstacles that MabVax has faced in pursuit of a cure for cancer,

18 one of the greatest threats has come from the very attorneys who MabVax trusted to protect the

19 Company. MabVax engaged Sichenzia/Kesner as its counsel for securities matters, with

20 confidence that they were “experts that help serve the unique needs of small and mid-cap

21 issuers.”1 As counsel, Sichenzia/Kesner owed a fiduciary duty, as well as ethical and

22 professional obligations, to use their best efforts to protect MabVax and its interests by offering

23 their very best advice with respect to compliance with the United States securities laws.

24 Sichenzia/Kesner did exactly the opposite. Rather than looking out for MabVax, the lawyers

25 exploited their positions of trust by looking out for themselves, and for other more-valued

26 clients who had illicit interests directly adverse to MabVax.


27 1
Securities Law, SICHENZIA ROSS FERENCE KESNER LLP, available at http://srfkllp.com/practice-areas/securities-
law/ (last visited August 17, 2018).
28 1
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 5 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 3. Specifically, Sichenzia/Kesner failed, throughout the course of over three (3)

2 years of representing MabVax, to advise and disclose that a number of its largest investors (the

3 “Investors”) were acting in a manner such that federal regulators would consider the Investors

4 to be an unlawful “control group” for purposes of the United States securities laws. To the

5 contrary, Sichenzia/Kesner advised MabVax that – based on their knowledge and experience as

6 “experts” – the Investors were not a group under settled law. Sichenzia/Kesner also assured

7 MabVax that they had structured and documented the Investors’ complex securities transactions

8 with legal firewalls against the formation of any control group, such as through the use of

9 innovative “beneficial ownership blockers.” Sichenzia/Kesner rendered that false advice

10 despite their intimate familiarity with the Investors, and with the facts and circumstances that

11 raise very serious questions about whether the Investors should be deemed a “group” with

12 respect to their collective investments in MabVax and other issuers. Sichenzia/Kesner obtained

13 such knowledge over the course of their extensive relationships with several of the Investors,

14 not only as their lawyers but – shockingly – as their business partners such that

15 Sichenzia/Kesner themselves are part of the Investors.

16 4. It is difficult to overstate the consequences of Sichenzia/Kesner’s exploitation of

17 MabVax. Since January 2018, MabVax has spent more than one million dollars cooperating

18 with an investigation by the U.S. Securities and Exchange Commission (“SEC”) into the very

19 “group” conduct by the Investors that Sichenzia/Kesner had falsely advised was safe and legal.

20 Even in the face of the SEC investigation, Sichenzia/Kesner continued to assure MabVax that it

21 was in full compliance with the securities laws and even claimed that they could, and should,

22 represent the Company in the investigation because they possessed the intimate knowledge of

23 the facts and the law, while other counsel would charge far more money to catch up. By May

24 2018, however, even Sichenzia/Kesner acknowledged that they could not continue to serve as

25 counsel for MabVax. Defendants’ intractable conflicts of interest could no longer remain

26 concealed.
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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 6 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 5. Since MabVax retained new counsel, the breadth of Sichenzia/Kesner’s

2 malfeasance has come into view. Sichenzia/Kesner provided MabVax with the misleading

3 legal advice in order to protect the illicit interests of themselves and their other clients, the other

4 Investors, thus allowing them to operate in a manner that financial regulators could view as an

5 undisclosed control group with respect to MabVax and other public company victims. In late

6 May, MabVax determined that, as a result of the emerging and still unresolved “control group”

7 questions, it could no longer confidently determine the validity of a strikingly large number of

8 shares issued to Investors, casting a cloud over as many as 2,628,766 shares (roughly 28% of its

9 common stock) that were issued on Sichenzia/Kesner’s watch. Absent that confidence,

10 MabVax determined that it could not responsibly file its report on SEC Form 10-Q for the

11 quarter ended March 31, 2018, and publicly disclaimed reliance on financial statements and

12 other reports that it had filed publicly since 2014. Unable to file those required reports,

13 MabVax has since been delisted from trading on the Nasdaq Capital Market, thus depriving it of

14 access to the Wall Street and Main Street investors it needs to finance treatments for cancer.

15 Instead of safeguarding MabVax’s standing in the open securities market, Sichenzia/Kesner and

16 the other Investors have economically strangled it to the point where its viability is in question.

17 6. Sichenzia/Kesner’s illegality and client exploitation went well beyond false

18 advice about the Investors’ alleged “group” status and related public disclosure. In December

19 2016, Kesner personally revised a submission to a regulator to avoid scrutiny of the Investors’

20 activity, falsely criticizing Company management for proposing to provide what he described as

21 excessive details that were not called for.

22 7. On another occasion, Sichenzia/Kesner breached their fiduciary and other duties

23 to MabVax by divulging client confidences, apparently tipping at least one of the Investors

24 about the termination of a critical consent right.

25 8. Sichenzia/Kesner continued their pattern of deception even in response to the

26 SEC investigation. Sichenzia/Kesner repeatedly advised that they were best situated to

27 represent the Company in connection with the investigation without disclosing that they were

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 7 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 hopelessly conflicted given: (1) their undisclosed involvement in the matters under

2 investigation, (2) their representation of multiple other Investors also known to be under

3 government scrutiny, and (3) their status as an investor and a member the same group of

4 Investors under investigation. Sichenzia/Kesner continued to mislead MabVax even after they

5 eventually conceded that their conflicts of interest compelled their withdrawal in May 2018.

6 Although Sichenzia/Kesner pledged assistance during the transition to successor counsel, they

7 instead lied repeatedly when asked about the representation and, shockingly, again violated

8 MabVax’s client confidentiality – alerting the Investors to a sensitive confidential meeting with

9 successor counsel within ninety (90) minutes of successor counsel leaving Kesner’s office.

10 Since then, Sichenzia/Kesner have flatly refused to answer basic questions, at one point even

11 demanding payment of a large legal fee before they would provide information and, ultimately,

12 saying that they had done enough and would do no more.

13 9. Sichenzia/Kesner’s misconduct was as lucrative for them as it has been

14 devastating to the client it exploited. Sichenzia/Kesner charged MabVax more than $1,600,000

15 for legal services, including approximately $250,000 for representing the Company in an SEC

16 investigation where counsel must have known that its own conduct was at issue. In his role as

17 an Investor, Kesner received thousands of MabVax shares, valued at more than $90,000. To

18 this day, MabVax does not know – because Sichenzia/Kesner have inexplicably refused to

19 disclose – the circumstances under which Harvey Kesner and fellow named partner Michael

20 Ference obtained and thereafter liquidated MabVax stock, making it impossible to know the full

21 extent of their trading profits. At this point MabVax cannot even determine whether its now-

22 former counsel traded in possession of the material non-public information entrusted to them by

23 their own public company client.

24 10. Simply put, MabVax engaged Sichenzia/Kesner as its counsel to keep it safe – to

25 ensure compliance with the securities laws, and to faithfully serve the Company’s interest in

26 dozens of transactions with the Investors. Instead, Sichenzia/Kesner inexcusably put MabVax
27 in harm’s way by providing conflicted, self-interested and improper advice and exploiting its

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 8 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 position of trust, all to promote and protect counsel’s own illicit interests and those of their

2 other clients, the other Investors.

3 THE PARTIES

4 11. Plaintiff MabVax Therapeutics Holdings, Inc. is, and at all times mentioned in

5 the Complaint was, a Delaware Corporation, with its principal place of business in San Diego

6 County, California.

7 12. Defendant Harvey Kesner is an individual who, on information and belief,

8 resides in South Orange, New Jersey. Kesner is employed in New York County, New York as a

9 partner at Sichenzia Ross Ference Kesner LLP. Kesner was the partner at Sichenzia with

10 primary responsibility for MabVax’s matters.

11 13. Defendant Sichenzia Ross Ference Kesner LLP is a limited liability partnership

12 with its principal place of business in New York County, New York, and identified in its

13 engagement letters with MabVax as “the Firm.” Sichenzia hired Kesner as a partner in or about

14 June 2009. Prior to October 17, 2016 Sichenzia was known as Sichenzia Ross Friedman

15 Ference, LLP.

16 14. The true names and capacities of the Defendants named herein as Does 1

17 through 10, inclusive, are unknown to MabVax, who therefore sues such Defendants by

18 fictitious names pursuant to Code of Civil Procedure § 474. MabVax will amend this

19 Complaint to show such true names and capacities when they have been determined. On

20 information and belief, Defendant Does 1 through 10 are responsible in some manner for the

21 actions complained of herein.

22 15. MabVax is informed and believes that in doing the wrongful, illegal, tortious,

23 intentional acts hereinafter alleged, Defendants, and each of them, acted as the agents and co-

24 conspirators of the other Defendants, acted within the course and scope of said agency, and

25 acted with the knowledge, consent, and approval of the other Defendants.

26
27

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 9 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 JURISDICTION

2 16. Jurisdiction and venue are proper because Defendants’ wrongful conduct was

3 directed to and caused MabVax injury in the County of San Diego, because Defendants

4 traveled to Southern California and also to the County of San Diego to solicit and perpetuate

5 their engagement by MabVax, and because Defendants’ false and misleading communications

6 were directed to and received in the County of San Diego. Throughout the period relevant to

7 this Complaint, Defendants called, emailed, and met with MabVax in the County of San

8 Diego.

9 MABVAX IS DECEIVED INTO AN ATTORNEY-CLIENT RELATIONSHIP WITH


SICHENZIA/KESNER
10

11 17. In or about March 2015, Barry Honig and John Stetson, two of the Investors,

12 introduced Kesner to MabVax. Honig and Stetson recommended that MabVax hire Kesner to

13 advise MabVax on the preparation and filing of its SEC filings, and on related corporate

14 matters. Honig, Stetson, and Kesner told MabVax that Kesner had exceptionally significant

15 experience representing companies like MabVax before the SEC and in fact had himself

16 practiced at the SEC for a period of time.

17 18. At the time Honig and Stetson introduced Kesner to MabVax, the Investors were

18 negotiating the terms under which they would make certain investments into MabVax. On

19 March 12, 2015, shortly after MabVax senior leadership first met Kesner, Stetson sent the term

20 sheet for the investments that explicitly required – not recommended – that MabVax “engage

21 the firm with which Harvey Kesner, Esq. is associated, as Company counsel (the “Firm”) for

22 corporate and [sic] securities for a minimum of 12 months period following closing.”

23 MabVax’s leadership team had never previously been compelled to hire counsel designated by

24 outside investors (instead of selecting counsel of its own choice), nor had they even heard of

25 such an unusual request. However, MabVax was assured that Sichenzia/Kesner were so expert

26 in the securities laws and transactional practice that they would better serve the Company than
27 other counsel. At the time of the retention, MabVax reasonably believed that Sichenzia/Kesner

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 10 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 would owe all legal duties to MabVax, and not to those who had originally introduced the

2 parties.

3 19. On April 2, 2015, MabVax executed – as it was required to do – an engagement

4 letter with Sichenzia, on terms dictated by Sichenzia/Kesner, for representation in connection

5 with MabVax’s general corporate securities matters, including matters related to ongoing SEC

6 reporting. In this letter, Sichenzia noted that Sichenzia had represented Honig, Stetson, and

7 another Investor, Mark Groussman, as well as certain associated companies or investment

8 entities, without elaboration as to the true extent of those conflicting relationships. MabVax

9 was required to agree that Sichenzia would not be disqualified from representing those clients

10 on matters that in the future might become adverse to MabVax so long as those other matters

11 were not substantially related to the MabVax representation. Indeed, Sichenzia made clear that

12 the waiver was limited, and “is not intended to and does not permit [Sichenzia] to represent any

13 interests that may be directly adverse to you or the Company that involve matters substantially

14 related to the services for which you or the Company retained [Sichenzia].”

15 20. MabVax entered into additional engagement letters with Sichenzia during the

16 years that followed, including with respect to matters where it is now apparent that

17 Sichenzia/Kesner’s legal representation of Investors, and economic participation as part of the

18 Investors, were adverse to the Company’s interests. As set forth below, the engagement letters,

19 and indeed, Sichenzia/Kesner’s attorney-client relationship with MabVax, were procured by

20 and the product of fraud and the other misconduct set forth herein.

21 21. At no time prior to their engagement, did Sichenzia/Kesner ever inform MabVax

22 that the Investors had previously inserted Sichenzia/Kesner as company counsel for other

23 investee companies. Nor did Kesner disclose the circumstances under which he had invested in

24 MabVax and other investee companies in coordination with other Investors. Sichenzia/Kesner

25 also did not disclose the full extent of their relationships with other Investors, nor any basis

26 upon which MabVax could assess whether a waiver was in the Company’s interest or, even,
27 whether Sichenzia/Kesner’s representation of and relationship with the Investors was in fact

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 11 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 “substantially related to” or “adverse to” the Company’s interests. Had such matters been

2 honestly disclosed, MabVax never would have retained Sichenzia/Kesner, and it certainly

3 would not have signed an engagement letter procured under improper circumstances.

4 22. At no time during the engagement, did Sichenzia/Kesner ever disclose the

5 matters set forth in the prior paragraph. Had such matters been honestly disclosed, MabVax

6 would not have continued to rely on Sichenzia/Kesner as counsel, and it certainly would not

7 have signed other engagement letters that, like the initial one, were procured under such

8 circumstances.

9 23. On information and belief, Sichenzia/Kesner were economically dependent on

10 and beholden to the Investors during the course of their representation of MabVax. As set forth

11 below, Sichenzia/Kesner profited handsomely from abusing their position of client trust.

12 24. Sichenzia/Kesner continued to represent MabVax until withdrawing from

13 representation on May 23, 2018, finally acknowledging the conflicts of interest that had

14 prejudiced MabVax for years.

15 SICHENZIA/KESNER’S LONGSTANDING RELATIONSHIP AND PARTICIPATION


WITH THE INVESTORS
16

17 25. At the time they were first engaged by MabVax, Sichenzia/Kesner had – and

18 continue to have – a longstanding attorney-client and business relationship with Honig, Stetson,

19 and other Investors. Kesner has recently admitted that Sichenzia/Kesner have worked on

20 numerous transactions with the other Investors during their long relationship – at least five (5)

21 transactions per year. It also is now clear – although never previously disclosed – that

22 Sichenzia/Kesner also have served as securities counsel for a number of companies, other than

23 MabVax, in which the Investors have invested, including Marathon Patent Inc., PolarityTE Inc.,

24 and Riot Blockchain Inc. At one point, Sichenzia/Kesner also served as trial counsel defending

25 some of the Investors (including Honig) against federal court claims alleging misconduct

26 substantially similar to that which Sichenzia/Kesner facilitated and concealed with respect to
27 MabVax.

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 12 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 26. Not only has Kesner worked as counsel for both the Investors, and certain

2 companies in which they invest, Kesner is himself one of the Investors. Kesner is the manager

3 of opaque entities named Paradox Capital Partners, LLC (“Paradox”); Darwin Investments,

4 LLC (“Darwin”); and Darwin Retirement Investments, LLC (“Darwin Retirement”) and holds

5 voting and dispositive power over the securities held by Paradox and, on information and belief,

6 the other LLCs. Upon information and belief, Paradox has also been invested in Marathon

7 Patent, Riot Blockchain and Majesco Entertainment Inc (the predecessor company to

8 PolarityTE) and Darwin and Darwin Retirement have been invested in Majesco Entertainment.

9 Kesner also invested in MabVax through Paradox and Darwin Retirement. These two Kesner-

10 controlled entities obtained shares in MabVax by directly investing in the Company through

11 financings; by receiving 185,000 free shares as a condition to financing required by another one

12 of the Investors; and by receiving, on at least one other occasion from at least one other

13 Investor, a distribution of 50,000 shares – for reasons which are unclear to MabVax, and

14 certainly have never been disclosed. Kesner even solicited the investment of yet another named

15 partner at Sichenzia, Michael Ference.

16 27. Sichenzia/Kesner have never disclosed the circumstances under which they

17 initially and subsequently invested in MabVax. To the contrary, even when explicitly and

18 repeatedly asked, Sichenzia/Kesner flatly refused to tell MabVax the details of its investment,

19 including open-market trading in its own client’s securities. As set forth below, from the

20 information it is clear that Sichenzia/Kesner profited handsomely from its relationship with

21 MabVax (in excess of $1,600,000), although even to this day MabVax cannot determine how

22 much more Sichenzia/Kesner profited – such as from open market trading or straw man private

23 transactions in their client’s securities – because those lawyers refuse to come clean.

24 SICHENZIA/KESNER’S FALSE ADVICE AS TO THE INVESTORS’ BENEFICIAL


OWNERSHIP AND CONTROL
25

26 28. The United States securities laws require that if any person beneficially owns

27 five percent of a class of any registered equity security of an issuer, that person must promptly

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9
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 13 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 disclose their beneficial ownership. Those who act together as a group in connection with their

2 investment in a company are treated as a “person” for purposes of this reporting requirement.

3 The calculation and reporting of beneficial ownership calls for an application of legal standards

4 to known facts, an area where Sichenzia/Kesner touted their market-leading legal expertise on

5 behalf of issuers like MabVax.

6 29. It recently has become clear that the Investors (including Sichenzia/Kesner) have

7 acted in such a way that, on information and belief, Sichenzia/Kesner knew, and regardless

8 should have known and advised MabVax, that the Company faced legal exposure because the

9 Investors should be treated as a “group” under the securities laws, including, but not limited to

10 the following facts and circumstances:

11 a. investing together in dozens of companies;

12 b. coordinating amongst each other the amounts each Investor will invest in

13 those companies;

14 c. consulting with one another about recommendations they will together

15 give, or demands they together will make, to the management of the companies in which they

16 invest;

17 d. including other Investors on their communications with the companies in

18 which they invest;

19 e. installing certain of the Investors as directors or officers or counsel in the

20 companies in which they invest; and

21 f. working together to coordinate meetings and introductions between the

22 companies in which they invest and third parties – such as institutional investors, investor

23 relations firms, and potential strategic transaction partners – and often requiring investee

24 companies to retain Investor-selected third parties.

25 30. Despite the fact that Kesner – who has worked in the field of securities law for

26 over thirty (30) years – had knowledge of his and the other Investors’ practices and inter-
27 relationships, at no point in time did he advise MabVax of the very real risk that the Investors

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 14 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 would be deemed a group under the securities laws. Nor did Sichenzia/Kesner ever advise

2 MabVax of the consequences to the Company of having to respond to even unproven

3 allegations of an undisclosed group (true or otherwise)2, including, but not limited to: expense

4 and reputational harm of defending public and financial reporting; the inability to satisfy going-

5 forward reporting obligations; the loss, in turn, of its listing on the Nasdaq; and the related

6 inability to even raise money from other investors.

7 31. To the contrary, Sichenzia/Kesner repeatedly advised MabVax that the Investors

8 were not a group for purposes of the securities laws, and ensured that the Company’s public

9 filings disaggregated the Investors’ holdings as if they were not a group. This was not an

10 isolated mistake. Sichenzia/Kesner reviewed, edited and approved literally dozens of SEC

11 filings over three (3) years – many reporting the Investors’ beneficial ownership and

12 outstanding share counts – without even once suggesting there was any risk that the Investors

13 could be considered a group, or that it would be in MabVax’s interest to aggregate the

14 Investors’ individual holdings for purposes of beneficial ownership reporting in these filings.

15 Even when asked, Sichenzia/Kesner assured MabVax that the “ownership blockers” inserted in

16 various investment and corporate documents were a legal firewall against the formation of any

17 group such that other factors known to Sichenzia/Kesner did not matter (including, for example,

18 that a single Lead Investor coordinated investments for the others).

19 32. Even as recently as May 2018, Sichenzia/Kesner continued to urge that MabVax

20 hold the line and disputed any claimed need to aggregate their and the other Investors’

21 ownership. Kesner represented that the “ownership blockers” were time-tested and effective,

22 and the SEC would not be able to establish otherwise. Sichenzia/Kesner also threatened that

23 MabVax had a contractual obligation to publicly disaggregate the Investors’ ownership.

24 According to Kesner, the Company may have already violated its obligations to the Investors by

25

26 2
MabVax does not assume that any regulator or court will ultimately conclude that such a group existed, or that all
Investors were participants. It is the very fact that, as a result of Sichenzia/Kesner’s malfeasance, MabVax is
27 exposed to such questions, investigation, and related aftermath, that already has so substantially harmed the
Company.
28
11
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 15 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 even publicly suggesting that a question may exist as to whether the Investors, or some of them,

2 had in fact operated as a group with respect to MabVax.

3 SICHENZIA/KESNER BREACH THEIR DUTIES TO – AND HARM – MABVAX


WITH RESPECT TO THE INVESTORS’ “CONSENT RIGHT” AND VIOLATE
4 CLIENT CONFIDENCES TO PRESERVE THE INVESTORS’ CONTROL
5 33. Sichenzia/Kesner’s misconduct and client exploitation also extended to the so-

6 called “Consent Right” held by the Investors throughout the representation. The Consent Right

7 is set forth in technical terms in various investment and transactional documents but, at its core,

8 is simple: with limited exceptions, MabVax must obtain the Consent Right holder’s permission

9 before it can raise additional money (such as any equity or debt financing).

10 34. Sichenzia/Kesner knew that the Consent Right allowed the Investors to extract a

11 wide range of demands from MabVax because: (1) MabVax is a development-stage company

12 dependent on outside financing (i.e., clinical research expenses well exceed its revenue), and (2)

13 permission under the Consent Right can be withheld at the whim of the Investors – even for no

14 reason stated – or can be provided only if MabVax agrees to still other additional “conditions”

15 in exchange for permission. For example, the Investors have forced MabVax to issue to them

16 free “incentive” stock that since 2015 was worth more than $9,600,000 at the time of issuance

17 (including thousands of shares to Sichenzia/Kesner) and required MabVax to hire lawyers and

18 other vendors handpicked and controlled by Investors (including, of course, Sichenzia/Kesner).

19 Sichenzia/Kesner also knew that, by refusing to grant permission under the Consent Right, or

20 by simply threatening to do so, the Investors blocked investment from other sources, including

21 critically-needed financing through a reputable investment bank in or about July 2017. Simply

22 put, the Consent Right presented a clear, publicly-disclosed risk to MabVax throughout the

23 Sichenzia/Kesner representation.

24 35. For the same reasons, advice regarding the Consent Right was basic to

25 Sichenzia/Kesner’s attorney-client relationship with MabVax. Sichenzia/Kesner represented

26 MabVax with respect to many transactions for which the Consent Right was negotiated and
27 triggered, and were responsible for documenting and reporting the Consent Right in countless

28
12
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 16 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 public filings and transactional documents. MabVax reasonably expected Sichenzia/Kesner to

2 provide loyal and competent legal advice with respect to the Consent Right, and to best

3 safeguard the Company in the face of constant risk that the Investors would abuse their right.

4 Instead, Sichenzia/Kesner abused their position of trust, and subordinated their client’s interests

5 to their and their fellow Investors’ interests.

6 36. As an initial matter, Sichenzia/Kesner never once advised MabVax that

7 counsel’s participation with the other Investors made the lawyers the beneficiaries of the

8 Consent Right. Nor did Sichenzia/Kesner ever disclose the reasons why the Consent Right was

9 held in the names of various Investors, much less that MabVax had the right to negotiate for

10 greater transparency in how the Consent Right was held and, ultimately, for greater limitations

11 on its use. In fact, Sichenzia/Kesner never even informed MabVax that, in practice, the facts

12 and circumstances of the ownership and use of the Consent Right could themselves create

13 questions about the calculation and reporting of the beneficial ownership of the Investors.

14 37. For example, Southern Biotech, Inc. was one of the Investors that held the

15 Consent Right during the representation. Although Sichenzia/Kesner did not disclose it to

16 MabVax, MabVax later learned that Honig served as Southern Biotech’s President, and held

17 voting and dispositive power over it. Very recently, MabVax has learned – from reviewing files

18 maintained by Sichenzia/Kesner – that still other Investors had a stake in or were involved in

19 Southern Biotech transactions, including Stetson, Philip Frost, Michael Brauser, and OPKO,

20 Inc. Sichenzia/Kesner have never once suggested that the oblique relationships between and

21 among Southern Biotech, Honig and other Investors itself raises questions about whether they

22 were conducting themselves in a manner harmful to MabVax. Indeed, despite their plainly

23 superior knowledge (of both the law and the facts) and their ethical, fiduciary, and other duties

24 owed to their client, Sichenzia/Kesner never advised that there was anything about Southern

25 Biotech, its ownership, or its Consent Right, even worth looking into.

26 38. Sichenzia/Kesner’s disregard of their duties to MabVax in connection with the

27 Consent Right is evidenced by their conduct in November and December of 2015, when

28
13
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 17 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 MabVax was negotiating an urgently-needed loan that required permission from Southern

2 Biotech as the Investors’ then-designated holder of the Consent Right. Sichenzia/Kesner were

3 responsible for representing MabVax’s interests, and in fact were preparing the consent

4 documents that they advised MabVax needed to obtain, including from Honig.

5 39. As the financing was being negotiated, during the first week of December 2015,

6 MabVax’s leadership team made the startling, joyous discovery that Southern Biotech no longer

7 held any of the shares required to maintain the Consent Right. MabVax urgently emailed

8 Kesner and others at Sichenzia, so counsel could confirm that MabVax was finally free of the

9 onerous Consent Right and advise the Company about how to proceed. Although implicit in all

10 confidential communications, MabVax explicitly instructed Sichenzia/Kesner to not even

11 circulate to the Investors the draft paperwork required under the Consent Right. MabVax did

12 not want to prematurely alert the Investors that they had terminated their own Consent Right –

13 and thus waived their significant leverage over MabVax.

14 40. Kesner did not promptly respond to, or even acknowledge, MabVax’s email

15 notifying them that Southern Biotech had self-terminated the Consent Right by transferring

16 away all of its shares. Although it expected to hear from its lead counsel about how to proceed

17 on this critical matter, MabVax instead heard directly from Honig that the shares that had been

18 transferred out of Southern Biotech (thus terminating the Consent Right) would be re-

19 transferred back into Southern Biotech theoretically re-establishing the Consent Right. In a

20 second email, Honig thanked MabVax’s leadership for “the heads up regarding Southern

21 Biotech,” and stated that the shares upon which the Consent Right rested were “back in[]

22 Southern Biotech.” MabVax was shocked by Honig’s email. The Company had never

23 discussed the issue with Honig, much less given him “heads up” that the Consent Right had

24 terminated to MabVax’s great benefit and relief. Accordingly, MabVax’s CEO replied to

25 Honig saying, “I did not give you the heads up on Southern Biotech. You already realized that

26 you had transferred all shares out of that entity. Someone else must have alerted you.”
27

28
14
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 18 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 41. On information and belief, it was MabVax’s own counsel at Sichenzia who gave

2 Honig the “heads up” that the Consent Right had terminated. Up to that point the MabVax

3 leadership team had only discussed the matter internally, with the exception of alerting Kesner

4 and his legal team for the purposes of legal advice – and with strict instructions to not notify

5 Investors. Indeed, only after Honig revealed his knowledge of the Consent Right termination

6 did Kesner address the matter with MabVax – not to help his client, but to declare that a never-

7 explained ethical conflict meant that he and his law firm could not become involved in the

8 dispute over whether the Consent Right had been terminated.

9 42.

#
As a result of this “heads up” – and the clear failure of Sichenzia/Kesner to

10 render appropriate and timely legal advice, and apparent violation of a client confidence –

11 Honig was able to re-transfer the shares to Southern Biotech and thus manufacture a legal

12 position that, by having done so, he had restored Southern Biotech’s Consent Right. Worse

13 still, as Sichenzia/Kesner and their fellow Investors were well aware, MabVax did not have the

14 wherewithal to fight a complex and protracted legal battle against the Investors over the

15 correctness of the “re-transferred” legal argument that never would have existed but for

16 Sichenzia/Kesner’s breach of client confidence. Forced to the table, on January 12, 2016

~~
17 MabVax was economically coerced by the Investors – aided by the information apparently

18 divulged by MabVax’s own lawyer – to agree to provide Southern Biotech with a new Consent

¢
19 Right. Indeed, it was not until years later that MabVax was finally able to escape the Consent

20 Right.

21 SICHENZIA/KESNER MINIMIZE THE INVESTORS’ INVOLVEMENT TO


22

23
~a~ 43.
--------::==--==------
REGULATORS

In December 2016, MabVax received a request for information from a regulator

24 in connection with a non-public investigation into trading activity in MabVax stock. MabVax

25 promptly sent the inquiry to Sichenzia/Kesner, in confidence and for purposes of obtaining legal

26 advice.
27

28
15
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 19 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 44. Sichenzia/Kesner advised MabVax that the regulator’s request was a routine

2 inquiry and nothing to be concerned about. Sichenzia/Kesner also reviewed a draft prepared by

3 non-lawyers at MabVax, which they criticized as “far too inclusive” and admonished the non-

4 lawyers for over-reading and over-answering questions. Kesner personally edited the response

5 in a manner he advised was appropriate under the circumstances. For example, in response to a

6 question about the nature and frequency of MabVax’s contact with two of the Investors, Kesner

7 characterized the contact as “occasional.” Although surprised by Kesner’s minimization of

8 those Investors’ contact, as non-lawyers the Company’s management deferred to counsel’s deep

#
9 expertise in responding to what they were told was a routine inquiry. In light of facts that have

10 come to light, it now is apparent that Sichenzia/Kesner knew or should have known that they

11 were exposing the Company to claims that its response was misleading or, at least, difficult to

12 defend. In so doing, Sichenzia/Kesner once again jeopardized MabVax in order to protect

13 themselves and fellow Investors from regulatory scrutiny as being part of an undisclosed

14 control group.

15 45. In May 2018, when asked about his involvement in the above-described

16 regulatory inquiry, Kesner falsely denied any role. He also falsely denied any involvement in

~~
17 other regulatory matters. Only upon subsequent investigation and email review did MabVax

18 determine that Sichenzia/Kesner not only were involved, but in a manner that seems only

¢
19 calculated to protect the lawyers and other Investors under the pretense of legal advice to the

20 Company.

21 SICHENZIA/KESNER’S MISCONDUCT CASTS DOUBT OVER MABVAX’S


22

23
~ar ---------=~~====-----
46.
CAPITALIZATION TABLE

During the course of the representation, the Investors repeatedly purchased

24 convertible preferred stock from MabVax pursuant to contracts and public filings advised by

25 Sichenzia/Kesner. Each share of convertible preferred stock could, upon the request of the

26 Investor holding that share, be converted by MabVax into shares of common stock that could be
27 immediately sold on the open market. At the insistence of the Investors, their convertible

28
16
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 20 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 preferred stock was also subject to “beneficial ownership blockers” that forbade the conversion

2 of preferred shares into common stock if, as a result, the converting shareholder would

3 beneficially own more than a certain percentage of MabVax (most often, 4.99%).

4 47. Sichenzia/Kesner advised MabVax throughout their engagement that the

5 “blockers” operated as a legal barrier against any need to aggregate or report the beneficial

6 ownership of the Investors as reaching 5%. Counsel also advised the blockers allowed for one

7 Investor to convert shares without regard to the ownership of MabVax stock by other Investors.

8 In effect, Sichenzia/Kesner explained and assured, and MabVax understood, that these blockers

9 kept the Company “safe” under the securities laws. As the Company later realized and

10 disclosed, however, Sichenzia/Kesner’s advice was false. The blockers do not legally foreclose

11 a determination that the Investors (or some of them) may be deemed as having acted as a

12 previously undisclosed group. Moreover, now that the legal frailty of the Sichenzia/Kesner

13 “blocker” firewall has been revealed, MabVax no longer has confidence that the 2,628,766

14 shares of common stock issued to the Investors via preferred share conversions are valid and

15 also cannot be certain its previous reports regarding the number of common shares outstanding

16 are accurate. Accordingly, MabVax has had to publicly disclaim reliance on four years of

17 previously-filed SEC reports and financial statements and is unable to file reports for 2018 as it

18 is required to do. Under these circumstances, it is sadly not surprising that MabVax has been

19 delisted from the Nasdaq Capital Market, and has been sued by certain of its shareholders.

20 48. In order to remedy this situation, MabVax has been forced to file a petition in the

21 Delaware Chancery Court seeking the extraordinary relief of judicial validation of the unknown

22 number of shares of arguably invalid common stock, and other corporate acts that also may not

23 be valid as a result of Sichenzia/Kesner’s false legal advice and dereliction of duty. That action

24 currently is pending; its outcome is uncertain, and it already has cost the Company

25 approximately $250,000 in legal fees and expenses, all of which would have been unnecessary

26 but for the misconduct of Sichenzia/Kesner.


27

28
17
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 21 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 SICHENZIA/KESNER PROFITED FROM THEIR MISCONDUCT


2 49. During the period of its representation, Sichenzia/Kesner charged MabVax

3 roughly $1,600,000 for purported legal services that, as set forth herein, were disloyal,

4 dishonest, and incompetent.

5 50. As also noted above, as an investor in MabVax, Kesner, through Paradox and

6 Darwin Retirement, received shares of convertible preferred stock. And as an experienced

7 attorney in the field of securities law, Kesner knew that, if his beneficial ownership were

8 calculated to include that of the other Investors, his beneficial ownership would well exceed the

9 4.99% “blocker” and thus he would be legally foreclosed from requesting conversion of any of

10 those preferred shares into common shares that would be freely tradeable. Despite that

11 knowledge (of the law and the facts), Kesner allowed Investors to convert 2,628,766 shares (for

12 a market value at issuance of an estimated $22,200,000 based on the closing price of common

13 stock on the date of conversion). Kesner himself received, through conversions requested by

14 Paradox and Darwin Retirement, at least 22,980 shares of MabVax common stock (valued at

15 $92,969) for his own personal benefit.

16 51. To this day, MabVax does not know the full extent of Sichenzia/Kesner’s trading

17 in MabVax stock, despite having asked repeatedly. Absent that information, MabVax cannot

18 determine the full extent of Sichenzia/Kesner’s ill-gotten gains, nor whether their violation of

19 client confidences also involved unlawful trading in their own names or by others to whom they

20 divulged the material, non-public information to which as counsel they were consistently privy

21 since 2015.

~--==--=====-====
22 SICHENZIA/KESNER ASSUME REPRESENTATION OF MABVAX IN AN

======-
INVESTIGATION DESPITE BEING HOPELESSLY CONFLICTED – AND THEN
23 CONCEAL FACTS NECESSARY FOR THE COMPANY’S ONGOING
REPRESENTATION BY SUCCESSOR COUNSEL
24

25 52. In February 2018, the SEC issued a subpoena to MabVax in connection with an

26 investigation by its Enforcement Division. As publicly disclosed, MabVax believes that

27 investigation pertains to MabVax’s relationship with certain of its investors, including whether

28
18
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 22 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 or not they have acted as an undisclosed control group in connection with MabVax, and the

2 manner in which they may have sought to control or influence MabVax.

3 53. Sichenzia/Kesner took on representation of MabVax in the SEC investigation,

4 advising both management and the Board of Directors that they were best positioned to do so.

5 Sichenzia/Kesner, however, failed to disclose to MabVax that they could not assume the

6 representation because they were hopelessly conflicted from doing so. Sichenzia/Kesner knew

7 or should have known of their conflicted status because they are among the Investors under

8 scrutiny; they had also served as counsel for the Investors in substantially similar matters; and,

9 in fact, they had provided the false and misleading advice to MabVax regarding the calculation

10 and reporting of beneficial ownership and potential “control group” issues under investigation.

11 Even ignoring all those clear and un-waivable conflicts, Sichenzia/Kesner failed to disclose

12 even the need for a limited conflict waiver in light of their representation of Investors named in

13 the subpoena issued to MabVax.

14 54. Ultimately, Sichenzia/Kesner acknowledged their intractable conflicts and

15 finally withdrew from representation in May 2018 – after wasting MabVax’s money and six

16 months during which competent counsel would have assisted the Company. Even as

17 Sichenzia/Kesner were leaving the representation, they compounded their misconduct. Kesner

18 repeatedly made false and misleading statements to successor counsel, for example, lying about

19 Sichenzia/Kesner’s role in the underlying conduct (e.g., denying that he was involved in

20 MabVax’s response to the December 2016 request for information from a regulator);

21 mischaracterizing the circumstances of his engagement by MabVax (including denying that the

22 Company was required to hire Sichenzia/Kesner a condition of investment); inaccurately

23 characterizing MabVax’s legal defenses, including the very “blocker” firewall theories that

24 created the exposure in the first instance; and refusing to disclose his outside trading activity in

25 MabVax stock.

26
27

28
19
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 23 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 55. Kesner also violated MabVax’s client confidences during the transition. He

2 alerted the Investors of a sensitive meeting with successor counsel within ninety (90) minutes of

3 successor counsel leaving his office.

4 56. On another occasion, Sichenzia/Kesner went so far as to demand that MabVax

5 pay a large legal fee as a condition of responding to successor counsel’s questions.

6 Sichenzia/Kesner later withdrew that payment precondition, instead simply refusing to provide

7 any additional information (including responses to pending questions) because Kesner believes

8 that he and his law firm have already done enough to help its client.

9 FIRST CAUSE OF ACTION

10 (Breach of Contract against all Defendants)

11 57. Plaintiff realleges and incorporates by reference the allegations set forth in

12 paragraphs 1 through 56, above.

13 58. By the acts and failures to act described above, Defendants entered into several

14 agreements to act as counsel to MabVax between the period of April 2, 2015 until May 23,

15 2018, in exchange for payment in cash and stock by MabVax. As alleged, those agreements

16 were procured by fraud and other misconduct, and set forth terms dictated by Sichenzia/Kesner.

17 59. MabVax performed all, or substantially all, of what was required under the terms

18 of its agreements with Defendants.

19 60. Defendants materially breached the agreements, including, without limitation, by

20 failing to disclose conflicts of interest in their representation of MabVax; disclosing MabVax’s

21 confidences; providing false and misleading advice to MabVax in connection with, among other

22 things, the Investors’ potential group status, the propriety of preferred stock conversions under

23 the terms of beneficial ownership blockers, and MabVax’s response to a regulator’s December

24 2016 request for information; and providing false and misleading information to successor

25 counsel.

26 61. Defendants’ breaches have caused and continue to cause MabVax damage.

27

28
20
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 24 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 SECOND CAUSE OF ACTION

2 (Misrepresentation against all Defendants)


3 62. Plaintiff realleges and incorporates by reference the allegations set forth in

4 paragraphs 1 through 61, above.

5 63. Defendants made the following representations, set forth above, among others, to

6 MabVax:

7 a. that Defendants would not represent interests directly adverse to

8 MabVax, and that Defendants did not have any conflicts of interest in representing MabVax

9 both as corporate securities counsel and in connection with the SEC investigation;

10 b. that the Investors could not be considered to be a group for purposes of

11 the securities laws;

12 c. that MabVax ought to describe as “occasional” its contacts with certain

13 Investors to a regulator;

14 d. that the common stock MabVax issued to the Investors – including

15 Defendant Kesner – were indisputably valid under the terms of MabVax’s beneficial ownership

16 blockers; and

17 e. that Defendants were acting on MabVax’s behalf, and not on behalf of

18 Defendants’ other clients, in the advice that Defendants provided to MabVax.

19 64. These and other representations were not true.

20 65. Even if Defendants may have initially believed or intended that these and other

21 representations were true (which MabVax does not believe), they had no reasonable grounds for

22 believing they were true when they were made.

23 66. Defendants intended that MabVax rely on its representations.

24 67. MabVax reasonably relied on these and other representations by, among other

25 things, engaging and relying on Defendants for legal advice as their counsel in connection with

26 corporate securities matters and a pending SEC investigation, by communicating with


27 Defendants regarding the termination of the Investors’ Consent Right, by filing reports with the

28
21
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 25 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 SEC that did not aggregate the Investors’ beneficial ownership, by processing the Investors’

2 conversions of preferred stock and issuing common stock as a result of those conversions, and

3 by modifying its responses to a request from information from a regulator, all in reliance on

4 Defendants’ representations, all of which have been a substantial factor in causing the harm

5 described herein.

6 68. Defendants’ conduct has caused and continues to cause MabVax damage.

7 THIRD CAUSE OF ACTION

8 (Negligent Professional Practice against all Defendants)

9 69. Plaintiff realleges and incorporates by reference the allegations set forth in

10 paragraphs 1 through 68, above.

11 70. Between April 2, 2015 and May 23, 2018, MabVax had an attorney-client

12 relationship with Defendants.

13 71. During the course of that attorney-client relationship, Defendants provided

14 MabVax with legal advice that Defendants knew or should have known was improper. Among

15 other things, Defendants:

16 a. advised MabVax that the Investors could not be considered to be a group

17 for purposes of the securities laws;

18 b. advised MabVax that the common stock MabVax issued to the Investors

19 – including Defendant Kesner – as a result of the Investors’ conversions of preferred stock were

20 indisputably valid under MabVax’s beneficial ownership blockers;

21 c. instructed MabVax to provide potentially misleading information in

22 response to a request for information from a regulator.

23 72. In addition, Defendants violated MabVax’s confidences by warning Southern

24 Biotech – to MabVax’s detriment – that Southern Biotech had transferred away all of the shares

25 Southern Biotech was required to hold to maintain its Consent Right. Defendants also violated

26 MabVax’s confidences by reporting to Investors Defendant Kesner’s confidential discussion


27 with MabVax’s successor counsel.

28
22
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 26 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 73. Further, Defendant Kesner provided false and misleading information to

2 successor counsel.

3 74. Defendants failed to disclose to MabVax that they had deep conflicts of interest

4 in representing MabVax as well as the Investors, and indeed that they were part of the Investors,

5 and as such, had interests directly adverse to MabVax.

6 75. Defendants also assumed representation of MabVax in connection with the

7 subpoena it received from the SEC despite the fact that they knew or ought to have known that

8 they had multiple conflicts of interest that ethically precluded their representation of MabVax.

9 76. Defendants’ negligent conduct has caused and continues to cause MabVax

10 damage.

11 FOURTH CAUSE OF ACTION

12 (Breach of Fiduciary Duty against all Defendants)

13 77. Plaintiff realleges and incorporates by reference the allegations set forth in

14 paragraphs 1 through 76, above.

15 78. Between April 2, 2015 and May 23, 2018, MabVax had an attorney-client

16 relationship with Defendants. As such, Defendants owed fiduciary duties to MabVax, including

17 a duty of reasonable care, a duty of loyalty, and a duty of confidentiality.

18 79. Defendants repeatedly violated these fiduciary duties to MabVax in multiple

19 ways:

20 a. Defendants provided MabVax with legal advice that Defendants knew or

21 should have known was improper, in breach of their fiduciary duties, including, without

22 limitation: (1) advising MabVax that the Investors could not be considered to be a group for

23 purposes of the United States securities laws; (2) advising MabVax that the common stock

24 MabVax issued to the Investors – including Defendant Kesner – as a result of the Investors’

25 conversions of preferred stock were indisputably valid under MabVax’s beneficial ownership

26 blockers; (3) instructing MabVax to provide potentially misleading information in response to a


27 request for information from a regulator.

28
23
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 27 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 b. Defendant Kesner failed to disclose to MabVax that he was a member of

2 the Investor group that had interests directly adverse to MabVax, including his transacting in

3 MabVax securities.

4 c. Defendants assumed representation of MabVax in connection with both

5 corporate securities matters and an SEC investigation despite the fact that they knew or ought to

6 have known that they had un-waivable conflicts of interest, and failed to inform MabVax of

7 those conflicts.

8 d. Defendants provided false and misleading information to MabVax’s

9 successor counsel. Defendants then violated MabVax’s confidences by sharing that discussion

10 with other Investors. Defendants additionally failed to answer questions posed to them by

11 successor counsel about their prior representation of MabVax, and even attempted to use those

12 questions to leverage payments of amounts purportedly owed to Defendants by MabVax.

13 e. Defendants violated MabVax’s confidences by warning Southern Biotech

14 – to MabVax’s detriment – that Southern Biotech had transferred out all of the shares Southern

15 Biotech was required to hold to maintain its Consent Right.

16 80. MabVax was damaged as a direct, proximate, and foreseeable result of the

17 willful and intentional misconduct of Defendants. Such willful and intentional misconduct, in

18 disregard of MabVax’s rights and business, justifies the awarding of punitive damages to

19 MabVax.

20 81. Defendants’ intentional conduct has caused and continues to cause Plaintiff

21 damage.

22 FIFTH CAUSE OF ACTION

23 (Fraud against all Defendants)

24 82. Plaintiff realleges and incorporates by reference the allegations set forth in

25 paragraphs 1 through 81, above.

26 83. Defendants made numerous misrepresentations to, and concealed numerous

27 material facts from, MabVax, including, without limitation:

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 28 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 a. misrepresenting the Investors’ potential status as a group for purposes the

2 securities laws;

3 b. concealing Defendants’ status as among the Investors;

4 c. misrepresenting the possibility that the shares of common stock issued to

5 the Investors – including to Defendant Kesner – as a result of the Investors’ conversion of

6 preferred stock may be invalid as forbidden under the beneficial ownership blockers;

7 d. concealing Defendants’ conflicts of interest in representing MabVax as

8 corporate securities counsel and in connection with the SEC investigation, and affirmatively

9 misrepresenting that Defendants were not aware of any such conflicts;

10 e. misrepresenting to MabVax the proper way to disclose, in response to a

11 regulatory inquiry, the nature and frequency of its contact with certain Investors;

12 f. concealing from MabVax their disclosure of MabVax’s confidences to

13 the Investors, in violation of their contractual, professional, and fiduciary duties to MabVax.

14 84. Defendants made these and other statements or omissions with knowledge of

15 their falsity.

16 85. Defendants made these and other statements or omissions with the intent to

17 induce MabVax’s reliance on such statements and omissions.

18 86. MabVax justifiably relied on the statements and omissions of Defendants, where

19 MabVax understood Defendants to be acting as its counsel, thereby having fiduciary, ethical,

20 and professional duties to MabVax, which MabVax reasonably believed Defendants would

21 honor.

22 87. These statements and omissions have damaged MabVax. MabVax has been

23 exposed to an SEC investigation, made potentially inaccurate statements on its public filings

24 and provided potentially misleading responses to a request for information from a regulator, and

25 issued an unknown number of potentially invalid shares to investors, necessitating public

26 disclosure of non-reliance on financial statements and other reports that the Company had filed
27 publicly since 2014.

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COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 29 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 88. MabVax was damaged as a direct, proximate, and foreseeable result of the

2 willful and intentional misconduct of Defendants. Such willful and intentional misconduct, in

3 disregard of MabVax’s rights and business, justifies the awarding of punitive damages to

4 MabVax.

5 89. Defendants’ intentional conduct has caused and continues to cause Plaintiff

6 damage.

7 SIXTH CAUSE OF ACTION

8 (Restitution for Unjust Enrichment against all Defendants)

9 90. Plaintiff realleges and incorporates by reference the allegations set forth in

10 paragraphs 1 through 89, above.

11 91. Defendants received a benefit from MabVax, specifically, charging MabVax

12 more than $1,600,000 for legal services.

13 92. This benefit is unjustly retained by Defendants where it was procured by

14 Defendants through fraud, as alleged above. This benefit also is unjustly retained by

15 Defendants where Defendants have materially breached the contracts between them and

16 MabVax, rendering those contracts unenforceable against MabVax.

17 93. Additionally, Defendant Kesner received a benefit from MabVax through

18 conversions requested by Paradox and Darwin Retirement of at least 22,980 shares of MabVax

19 common stock (valued at over $90,000) for his own personal benefit.

20 94. This benefit is unjustly retained by Defendant Kesner where it was procured by

21 fraud, as alleged above.

22 PRAYER FOR RELIEF

23 WHEREFORE, Plaintiff prays for judgment against Defendants as follows:

24 1. On the First Cause of Action, for at least $XX,000,000 representing the loss of

25 enterprise value, and other damages in an amount to be proven at trial;

26 2. On the Second Cause of Action, for at least $XX,000,000 representing the loss

27 of enterprise value, and other damages in an amount to be proven at trial;

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26
COMPLAINT FOR DAMAGES CASE NO. 18CV______
Case 1:20-cv-00551-AKH Document 13-1 Filed 03/12/20 Page 30 of 30
INADMISSIBLE: FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FED. R. EVID. 408 & CAL. EVID. CODE §§ 1152, 1154

1 3. On the Third Cause of Action, for at least $XX,000,000 representing the loss of

2 enterprise value, and other damages in an amount to be proven at trial;

3 4. On the Fourth Cause of Action, for at least $XX,000,000 representing the loss of

4 enterprise value, and other damages in an amount to be proven at trial, and punitive damages

5 according to proof;

6 5. On the Fifth Cause of Action, for at least $XX,000,000 representing the loss of

7 enterprise value, and other damages in an amount to be proven at trial, and punitive damages

8 according to proof;

9 6. On the Sixth Cause of Action, for at least $X,X00,000 representing the benefits

10 unjustly retained by Defendants, and other damages in an amount to be proven at trial;

11 7. For reasonable attorneys’ fees;

12 8. For expense incurred in this lawsuit; and

13 9. For such other relief as the Court deems proper.

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Dated: August ___, 2018
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COMPLAINT FOR DAMAGES CASE NO. 18CV______