The Securities and Exchange Commission announced charges against Californians Joseph A. Padilla and Kevin C. Dills in a case which reads like an exciting thriller. The plot? A fraudulent scheme to illegally distribute stock to the general public. The setting is? The world of offshore accounts and small companies. What are the stakes? The stakes are high, with potentially millions of dollars in fines and prison sentences at stake.
The Alleged Scheme
According to the SEC complaint, Padilla orchestrated, between February 2020 and August 2022, a fraudulent scheme in order to sell illegally stock of several small businesses to the public. But how, you might ask? Padilla was alleged to have enlisted people who paid him for the illegal stock sales. The individuals who Padilla hired to sell stock in their names were like ghosts.
Padilla isn’t just another puppeteer. He allegedly used his own brokerage account, as well as those of family members and friends, to profit from the scheme. He was like a chess player who moved pieces to his benefit.
The Dills Connection
What about Dills? Dills was allegedly secretly controlling Oncology Pharma, Inc., a company that had stock that was part of Padilla’s plan. Imagine a puppeteer behind the scenes pulling strings. Dills provided Padilla With Oncology Pharma Stock, Padilla arranged that the stock be sold to public and Padilla returned about $20 million of proceeds to Dills via a loophole of foreign accounts. The complaint claims that Padilla, Dills and Oncology Pharma sold Oncology Pharma shares while Dills arranged to have Oncology Pharma issue a number of press releases in order to make Oncology Pharma’s stock attractive to investors.
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The Legal Implications
The complaint claims that Padilla Dills and the Securities Act of 1933 Sections 17(a), (a), and (b), and Section 10(b), and Rules 10b-5,(a), and(c) violated anti-fraud provisions. Also, they are accused of violating Sections 5 (a) and c) of Securities Act. Padilla Dills is facing various types of relief from the SEC.
- Permanent injunctive relief
- Civil penalties
- Penny stock bars
- Interest and disgorgement of pre-judgment
- Other injunctive remedies
The complaint names several relief defendants, who are alleged to have received the proceeds of this scheme. They are seeking disgorgement as well as prejudgment interests from them.
Related Criminal Case
On March 21, 2023, the U.S. Attorney’s Office for the District of Massachusetts indicted Padilla and Dills for a criminal case that was related.
The SEC continues its investigation and the case will be handled by a Boston Regional Office team. The SEC expressed its gratitude to various domestic and international entities for their help in this case.
Keep an eye out for further updates about this high-stakes finance drama.