BOSTON — A Canadian citizen and Long Beach, Calif. resident has been charged and agreed to plead guilty to three securities felonies, two of which involved the chairman of the board of directors of a company he had not sold publicly worth more than $1.3 million. His attorney in Yuba, Calif., brokered an undisclosed stock sale, and he was also charged and agreed to plead guilty to a felony securities crime.
Avtar Singh Dhillon, 61, was charged with one count of knowingly failing to disclose the sale of shares, one count of aiding and abetting the sale of unregistered securities and one count of secrecy conspiracy to sell compensation. Daniel V. Martinez, 62, has been charged with one count of selling unregistered securities. The court has yet to schedule a plea hearing for the accused. Dhillon was previously arrested and charged with criminal charges in August 2021.
According to the filing, Dhillon and Martinez violated securities laws by jointly selling stock in the Massachusetts-based company Arch Therapeutics, Inc., of which Dhillon was chairman at the time. Specifically, Dhillon and Martinez allegedly placed 2.75 million shares of Arch Therapeutics beneficially owned by Dhillon into a limited liability company created by Martinez. Dhillon and Martinez then allegedly collaborated to sell shares on the open market without a valid exemption under the relevant securities laws, and distributed proceeds of approximately $1.34 million. Proceeds are distributed primarily to third parties to benefit Dhillon, with a small portion distributed directly to Martinez. Dhillon then knowingly failed to report the stock sales to the SEC and the investing public as required.
Separately, Dhillon is also accused of participating in a securities conspiracy involving undisclosed payments to analysts who subscribe to newsletters. Specifically, Dhillon entered into an agreement with others that prompted Emerald Health Pharmaceuticals (EHP), a San Diego-based life sciences company, to indirectly compensate analysts for subscribing to newsletters for promoting EHP’s securities offerings without the analysts or the newsletter disclosing compensation as required. under securities laws. Dhillon is a one-time board member and indirect shareholder of EHP, which raised tens of millions of dollars in securities offerings.
Charges of knowingly failing to disclose sales carry up to 20 years in prison, three years of supervised release and a $5 million fine. The charges of selling unregistered securities and peddling compensation for confidential conspiracy each carry a maximum sentence of five years in prison, three years of supervised release and a fine of $250,000, or twice the total gain or loss, whichever is greater. The sentencing was made by a federal district court judge in accordance with the U.S. Sentencing Guidelines and statutes governing sentencing determination in criminal cases.
The announcement was made by U.S. Attorney Rachael S. Rollins and Special Agent Joseph R. Bonavolonta, who oversees the FBI’s Boston office. Valuable assistance was provided by the SEC headquarters, Boston and Los Angeles regional offices. Assistant U.S. Attorney James R. Drabick of the Rollins Division of Securities, Finance and Cyber Fraud is prosecuting the case.
The details contained in the allegation document are the allegation. The defendant is presumed innocent unless proven guilty in court beyond a reasonable doubt.