This article was first published on January 16, 2018.
It has been updated to include additional information.
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The hotel industry has long been plagued by lawsuits from investors and regulators.
But there is a new lawsuit filed this week that could shake up the industry.
The Securities and Exchange Commission has charged a California hotel operator, the GDT Group, with defrauding investors by concealing a lack of transparency regarding the use of a controversial drug that it said was the “cure” for breast cancer.
The GDT is a subsidiary of hotel chain Hilton Hotels & Resorts, and is accused of violating a rule in 2015 that allowed hotels to use a drug called Nexium, a compound derived from an insecticide, to treat patients suffering from ovarian, breast, and prostate cancers.
But a few months after the rule was put into effect, the FDA found that the drug was not safe, and GDT has faced lawsuits from multiple investors who allege the drug is unsafe.
While the lawsuit could result in big fines for GDT and its owners, it could also bring a lawsuit for investors who have invested in the hotel chain.
And that could cause a big shakeup at the industry, said Michael B. Geller, an analyst at Piper Jaffray.
“The hotels are not going to be happy, and that’s probably what’s going to happen, because they’ve lost so much value,” he said.
“They’re going to lose investors,” he added.
Geller said he thinks the case will be settled quickly.
But he said that it is not necessarily a good sign for the industry as a whole.
“I think it’s probably not going be a great surprise to the industry,” he told CNBC.GDT did not immediately respond to CNBC’s request for comment.
The lawsuit was filed on Friday in a California court.
The complaint is a separate lawsuit filed by the SEC last year.
The agency accused GDT of “knowingly deceiving investors and the public about the safety and efficacy of Nexium in its Nexium for Ovarian Cancer product line.”
The lawsuit also alleges that GDT misled investors by claiming that its drug had shown promise in the treatment of breast cancer in the past.
In addition, the SEC accused GDE of using its influence in the health care industry to help obtain approval for Nexium as a treatment for ovarian cancer.GDE said in a statement to CNBC that the company believes that this lawsuit is politically motivated and has already taken legal action to fight the SEC’s claims.
G DT, for its part, said in the statement that the lawsuit is baseless.”GDT and the company have not received any settlement offers from the SEC, and it would not be appropriate to comment further at this time,” it said.
But the lawsuit has drawn a lot of attention from the medical community, which has been urging regulators to crack down on companies that use potentially risky treatments.
“It’s a very dangerous industry,” said Dr. David E. Stumpf, an associate professor at Columbia University’s School of Medicine.
Stumpf and other experts have warned that the drugs are so controversial that they could trigger a new class of lawsuits against companies that are not yet known to be unsafe.GTRG, which is based in Southern California, said that there are no current plans to sue, but that if regulators do, it will fight it vigorously.
“This is an incredibly complex case involving complex litigation issues,” GDT said in its statement.
“We remain confident that the SEC will prevail and the court will rule in our favor.”
In a statement, the hotel industry said that the GTRG lawsuit is “unfortunate” and said it will not stop working to improve the quality of the drugs used in its care.
“We are committed to the safety of our guests, and we believe the SEC has the authority to pursue our claim, if necessary, against GDT for its actions that violate the law,” the statement said.GTS, meanwhile, said it has no plans to file a lawsuit in the matter, and has a long history of working with the FDA to improve its drugs.
The suit, which alleges violations of federal securities laws, seeks damages, including the disgorgement of profits, disgorgements of costs, punitive damages, attorney’s fees, and court costs, as well as costs and interest.GSTG said in an email that it has been cooperating with the SEC and has been working to fix its drug, but added that it “strongly opposes” the lawsuit.