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September 23, 2016 at 05:20 AM
The Securities and Exchange Commission awarded $4 million to a whistleblower; and, in two separate cases, charged a marijuana-related company and a blank check company manufacturer with fraud.
SEC Charges Execs, Companies in Marijuana Fraud Scheme
The SEC announced fraud charges against three individuals and four companies in a scheme involving illegal stock sales and false financial filings of a company that makes containers for growing marijuana.
According to the agency, William Sears orchestrated the scheme along with his brother-in-law Scott Dittman, who was the chief executive officer and sole officer at Fusion Pharm Inc.; Sears concealed his control from behind the scenes.
Sears and Dittman hired Cliffe Bodden to help them create fraudulent corporate documents that enabled Fusion Pharm to issue common stock to three other companies controlled by Sears, who then illegally sold the restricted stock into the market for $12.2 million in profits while hiding the companies’ connection to Fusion Pharm.
Sears transferred some of his illegal proceeds back to Fusion Pharm so the money could be falsely reported as revenue, and the company issued press releases and financial reports that misled investors to believe the revenue came from sales of the containers called PharmPods.
Sears, Dittman and Bodden, as well as Fusion Pharm and Sears’s other three companies, agreed to settle the SEC’s charges, with monetary sanctions to be determined at a later date.
The SEC has barred Sears and his three companies, Dittman and Bodden from participating in any future penny stock offerings, and Sears and Dittman are permanently barred from serving as an officer or director of any public company. Dittman also is permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.
In a parallel action, the U.S. Attorney’s Office for the District of Colorado has announced criminal charges against Sears and Dittman.
The SEC has also separately instituted an administrative proceeding against attorney Tod DiTommaso, in which its enforcement division alleges that he issued attorney opinion letters for Sears and Dittman falsely stating that unrestricted shares in Fusion Pharm could be issued into the market when in reality it was restricted stock.
SEC Rewards Whistleblower With $4 Million
In its latest award to a whistleblower, the SEC announced it had provided more than $4 million to one whose original information alerted the agency to a fraud.
