SEC Charges Two New Defendants in Fraudulent Microcap Manipulation Scheme Orchestrated Through International AccountsLitigation Release No. 24583 / August 30, 2019Securities and Exchange Commission v. Morrie Tobin et al., Civil Action No. 1:18-CV-12451 (D. Mass. filed November 27, 2018)
The Securities and Exchange Commission filed an amended complaint charging Brian Quinn, a California resident, and David Skriloff, a New York resident, for their roles in a scheme to profit from the manipulation and illegal sale of stock of a publicly traded company, Environmental Packaging Technologies Holdings, Inc., of which Skriloff was the CEO.
On October 2, 2018, the SEC filed an emergency action and obtained an asset freeze against Roger Knox and Wintercap SA, charging them with a scheme that generated more than $165 million of illegal sales of stock in at least 50 microcap companies. On November 28, 2018, the SEC chargedMorrie Tobin, Milan Patel, Matthew Ledvina, and Daniel Lacher, with scheming to hide Tobin's ownership and control over Environmental Packaging and CURE Pharmaceutical Holding Corp. by using offshore entitites to hold his stock and by establishing accounts to sell that stock at Wintercap.
Acording to the SEC's amended complaint, Quinn helped facilitate a reverse merger between a public shell company secretly controlled by Tobin and a private-bulk packaging company for which Skriloff served as CEO. Skriloff, who continued as the CEO of the combined entity, Environmental Packaging, allegedly raised money from investors, which the defendants used to pay a stock promoter to tout the stock of Environmental Packaging, while creating the impression that the promoter's recommendation came from a neutral third party. Skriloff also allegedly attempted to disguise the payment to the stock promoter as part of a purported consulting agreement. The amended complaint further alleges that, during the promotional campaign, the price of Environmental Packaging shares more than doubled and Tobin profited from the higher share price. According to the amended complaint, Skriloff, as the CEO of Environmental Packaging, also made misstatements in public reports filed with the SEC about the reverse merger and the company's connection to the promotional campaign.
The amended complaint also alleges that after the SEC halted trading in the securities of Environmental Packaging on June 27, 2017, the defendants took steps to obstruct the SEC's investigation - and conceal their own involvement in the matter - by arranging to change the names listed on Wintercap account records.
The SEC's amended complaint, filed in the U.S. District Court in the District of Massachusetts, charges each of the defendants with violating various federal securities laws, including the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. It also charges Tobin, Patel, Ledvina, Lacher, and Quinn with violating the securities registration provisions of Sections 5(a) and (c) of the Securities Act. The amended complaint further charges Skriloff with violating Section 17(a)(2) of the Securities Act of 1933 and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, aiding and abetting the other defendants' violations of Section 10(b) of the Exchange Act and Sections 17(a)(1) and (3) of the Securities Act, and aiding and abetting Environmental Packaging's violation of Section 17(a)(2) of the Securities Act. The SEC seeks a permanent injunction against future violations, disgorgement of allegedly ill-gotten gains plus prejudgment interest, penny stock bars, and monetary penalties. The SEC also seeks an order barring Skriloff from serving as an officer and director of a public company.
The SEC's continuing investigation and litigation is being conducted by J. Lauchlan Wash, Trevor Donelan, Eric Forni, David Scheffler, Rebecca Israel, Jonathan Allen, Kathleen Shields, Susan Anderson, and Amy Gwiazda of the SEC's Boston Regional Office, in coordination with the Enforcement Division's Microcap Fraud Task Force. The SEC appreciates the assistance of the FBI and the U.S. Attorney's Office for the District of Massachusetts, the Financial Industry Regulatory Authority (FINRA), the British Columbia Securities Commission, the Ontario Securities Commission, and the Malta Financial Services Authority. |
