SEC Charges Two Individuals in Connection with Fraudulent Scheme to Illegally Sell Stock to the Public

Today, the SEC has brought charges against Joseph A. Padilla and Kevin C. Dills, both residents of California. The SEC’s lawsuit posits that Padilla orchestrated a fraudulent scheme to illicitly sell shares in several small-scale companies to the public from February 2020 through August 2022. Dills is alleged to have participated in Padilla’s fraudulent operations with stock from a company that Dills clandestinely controlled.

The lawsuit outlines that Padilla not only acted out of personal interest but also on behalf of individuals who compensated him to coordinate their unlawful stock sales. It is alleged that these individuals concealed their identities by conducting sales via offshore accounts under different names, established by Padilla. Further accusations include Padilla trading via his own and his family and friends’ brokerage accounts, both to accrue profits from the scheme and to manipulate stock prices in favor of the scheme. It’s also claimed that Padilla enlisted the aid of a stock trader at a registered broker-dealer firm to expedite stock trading as part of the scheme. Padilla allegedly timed these stock sales to align with stock promotions or news releases meant to attract investor interest.

In Dills’ case, it is claimed that he secretly controlled Oncology Pharma, Inc., one of the companies whose stock was involved in Padilla’s operations. Allegedly, Dills supplied Padilla with Oncology Pharma stock which was then organized for public sale. Following this, approximately $20 million in proceeds were returned to Dills via a complex network of foreign bank accounts. It’s alleged that Oncology Pharma stock was sold while Dills coordinated press releases designed to heighten the appeal of the company’s stock to investors.

The SEC’s complaint alleges violations by Padilla and Dills of Sections 17(a)(1) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rules 10b-5(a) and (c) under these Acts, along with breaches of Sections 5(a) and (c) of the Securities Act’s securities registration provisions. The SEC is seeking various remedies against Padilla and Dills, including permanent injunctive relief, civil penalties, penny stock bars, disgorgement and prejudgment interest, and other injunctions. The SEC also names Bright Star International, Inc., Life Sciences Journeys, Inc., Carlos Hernandez, Jamie Quick, Ashley Robinson, and Arlene Sandoval as relief defendants, alleging they each benefited from the scheme’s proceeds. Disgorgement and prejudgment interest from these relief defendants are being sought.

On March 21, 2023, the U.S. Attorney’s Office for the District of Massachusetts indicted Padilla and Dills in a parallel criminal case.

The SEC’s case is being managed by Ryan Murphy, Michael Moran, Kathleen Shields, and Amy Gwiazda from the Boston Regional Office. The SEC acknowledges the support of the U.S. Attorney’s Office for the District of Massachusetts, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority. It also recognizes the aid of various international financial institutions. The SEC’s investigation continues.