CellCyte Genetics was a hot stock last year with a market value that hit about $440 million at one point. However, the biotech was also hyped by anonymous faxes and brochures paid for by outsiders with curious links to a well-known Canadian stock promoter and since December, its shares have dropped more than 90 percent

Now, the the Securities and Exchange Commission has begun an inquiry, according to a letter written by a lawyer representing CellCyte, The Seattle Times writes. The letter, which filed last month in King County Superior Court as part of the company’s legal dispute with a former employee, refers to a “confidential inquiry” by the SEC and was written by Rebecca Lamberth, an outside counsel for CellCyte. German securities regulators are also investigating recent stock-promotion efforts related to the company, the paper also reports.

The first whiff of SEC interest surfaced in a police report filed in February by Theresa Deisher, a former CellCyte researcher who said she was threatened by people at her former employer. The Feb. 22 letter confirming the inquiry is among court filings in a dispute stemming from Deisher’s departure from CellCyte in October 2007, the paper adds.

Lamberth’s letter complains that Deisher made “improper disclosures” in her police report: “….The intentional disclosure of the confidential inquiry by the Securities and Exchange Commission could be seen as nothing more than an attempt to further injure the company in order to create a platform from which she wrongly hopes to profit,” the letter said.

Companies ordinarily disclose an inquiry or investigation in their quarterly reports, but CellCyte hasn’t filed a report since last November, the paper points out, adding that, late last month, the biotech told the SEC it was unable to file its year-end report on time but would do so soon.