Clearinghouse halts settlement of stock transactions in Lifeline

The Depository Trust & Clearing Corp., the largest securities-settlement company in the United States, said last week it no longer will provide trading services for shares of Reno-based Lifeline Biotechnologies Inc.

The halt comes after the Securities and Exchange Commission filed an administrative action against a New York brokerage firm that alleges the brokerage didn't adequately supervise trading in shares in Lifeline.

Jim Holmes, president of Lifeline, said last week his company is working to lift the Depository Trust & Clearing suspension as soon as possible. He said the company was caught in the crossfire of the SEC allegations.

During 2006 and 2007, the SEC alleged, a customer delivered more than 1 billion shares of Lifeline stock into his accounts at Leeb Brokerages Services Inc., a now-closed New York brokerage.

The customer, the SEC said, was a stock promoter who was affiliated with Lifeline, and the customer had tipped a broker in the firm about promotional campaigns for the company.

At one point, the customer controlled more than 31 percent of the 6.5 billion shares that Lifeline had issued during nine months of 2006. Regulators said the shares had been acquired in private transactions and hadn't been registered for sale to the public.

The broker and his supervisors at Leeb should have recognized red flags in the trading, the federal regulator said, and the SEC said some of the trading appears to have been illegal.

The president of Lifeline, which has been developing an early-detection system for breast cancer, said he wants to clear his company's name. "Lifeline has no knowledge of, or association with, Leeb or any of its affiliates or employees, and was in no way a party to the actions of the broker, its employees or affiliates," Holmes said last week.

The shares have been trading recently on the Pink Sheets electronic quotation system for less than penny a share.