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Justice News

Department of Justice
U.S. Attorney’s Office
District of Massachusetts

FOR IMMEDIATE RELEASE
Tuesday, October 4, 2022

Former Chair of Massachusetts Health Care Company Board of Directors and Attorney Agree to Plead Guilty to Selling Unregistered Securities

BOSTON – A Canadian citizen and resident of Long Beach, Calif., has been charged and has agreed to plead guilty to three felony securities offenses, two of which concern his undisclosed sale of over $1.3 million worth of shares in a company for which he was the board chairman. His attorney in Yuba City, Calif., who facilitated the undisclosed stock sales, has also been charged and has agreed to plead guilty to a felony securities offense.

Avtar Singh Dhillon, 61, was charged with one count of willful failure to disclose stock sales, one count of aiding and abetting the sale of unregistered securities and one count of touting compensation nondisclosure conspiracy. Daniel V. Martinez, 62, was charged with one count of sale of unregistered securities. Plea hearings for the defendants have not yet been scheduled by the Court. Dhillon was previously arrested and charged by criminal complaint in August 2021.

According to the charging documents, Dhillon and Martinez violated the securities laws when they worked together to sell shares of the Massachusetts-based company Arch Therapeutics, Inc., for which Dhillon was then the board chairman. Specifically, Dhillon and Martinez allegedly placed 2.75 million Arch Therapeutics shares that Dhillon beneficially owned into a limited liability company that Martinez created. It is alleged that Dhillon and Martinez then worked together to sell the shares in the open market without a valid exemption under the relevant securities laws and to distribute the approximately $1.34 million in proceeds. The proceeds were distributed primarily to third parties for Dhillon’s benefit, with a small portion distributed to Martinez directly. Dhillon thereafter willfully failed to report the stock sales to the U.S. Securities & Exchange Commission and the investing public, as he was required to do.

Separately, Dhillon is also alleged to have participated in a securities conspiracy involving the nondisclosure of compensation paid to a subscription newsletter analyst. Specifically, Dhillon agreed with others to cause Emerald Health Pharmaceuticals (EHP), a life sciences company in San Diego, to indirectly compensate a subscription newsletter analyst to tout a securities offering by EHP without the analyst or the newsletter disclosing the compensation, as was required under the securities laws. Dhillon was both a one-time board member of and an indirect shareholder in EHP, which raised tens of millions of dollars in the securities offering.

The charge of willful failure to disclose sales provides for a sentence up to 20 years in prison, three years of supervised release and a fine of $5 million. The charges of sale of unregistered securities and touting compensation nondisclosure conspiracy each provide for a sentence up to five years in prison, three years of supervised release and a fine of $250,000, or twice the gross gain or loss, whichever is greater. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.

United States Attorney Rachael S. Rollins and Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Office made the announcement. Valuable assistance was provided by SEC’s headquarters, Boston and Los Angeles regional offices. Assistant U.S. Attorney James R. Drabick of Rollins’ Securities, Financial & Cyber Fraud Unit is prosecuting the case.

The details contained in the charging documents are allegations. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Topic(s): 
Securities, Commodities, & Investment Fraud
Component(s): 
Updated October 4, 2022