Former Stockbroker Sentenced to More Than Five Years in Prison for Penny-Stock Securities Fraud Scheme
For Immediate Release
U.S. Attorney's Office, District of Massachusetts
Defendant conspired to facilitate and participate in market manipulations and attempted to acquire a fraudulent Ukrainian passport to flee prosecution
BOSTON – A California man was sentenced yesterday in federal court in Boston for his involvement as the principal stock trader in a sophisticated securities fraud scheme that generated tens of millions of dollars in illicit profits.
Joseph A. Padilla, 54, of Carlsbad, Calif. and Cabo San Lucas, Mexico, was sentenced by U.S. District Court Judge Richard G. Stearns to 66 months in prison and one year of supervised release. He was also ordered to forfeit $3 million and pay restitution in an amount to be determined at a later date. On Aug. 17, 2023, Padilla pleaded guilty to one count of conspiracy to commit securities fraud, two counts of securities fraud and one count of attempting to cause the production of an identification document without lawful authority. Padilla was charged in March 2023 along with an alleged co-conspirator.
Padilla is a former stockbroker who was barred from the securities industry in 2012 by the U.S. Securities and Exchange Commission (SEC). Between 2020 and 2022, Padilla conspired with others to commit securities fraud by facilitating and participating in market manipulation schemes involving the concealed-control of the shares of penny-stock companies.
Specifically, between in or about January and July 2021, Padilla participated in a market manipulation scheme involving the shares of Oncology Pharma, Inc., a thinly traded company that traded on the over-the-counter securities market under the ticker symbol ONPH. As part of the scheme, a co-conspirator allegedly caused nearly all of ONPH’s free-trading shares to be transferred to multiple brokerage accounts for the benefit of Padilla’s clients at the Cayman Islands broker Valor Capital, with which Padilla had a close, unofficial association. Padilla then engaged in manipulative trading in ONPH designed, at least in part, to artificially drive up the company’s stock price. Padilla then began dumping the ONPH shares, which were under common control, to unsuspecting investors in Massachusetts and throughout the United States during a promotional campaign, generating illicit proceeds in the tens of millions of dollars.
Additionally, between February 2021 and April 2021, Padilla participated in a similar scheme involving the shares of Charlestowne Premium Beverages Inc., a thinly traded company that traded on the over-the-counter market under the ticker symbol FPWM. As part of the scheme, Padilla orchestrated an effort designed, at least in part, to artificially increase Charlestowne’s stock price. He then facilitated the sale of millions of Charlestowne’s shares during a promotional campaign to unsuspecting investors in Massachusetts and throughout the United States, generating illicit proceeds in the millions of dollars.
Padilla was arrested on a criminal complaint in August 2022 and released on pre-trial conditions, which included surrendering his passport and not obtaining another passport. While on pre-trial release, Padilla attempted to acquire a fraudulent Ukrainian passport so that he could flee prosecution. Padilla was arrested in January 2023 for violating his terms of release and his pre-trial release was revoked.
If you traded in ONPH and/or FPWM during the time periods indicated above and believe that you may be potential victims of this fraud, please visit: https://www.justice.gov/usao-ma/victim-and-witness-assistance-program/united-states-v-padilla-et-al.
Acting United States Attorney Joshua S. Levy and Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division made the announcement today. Assistant United States Attorneys James R. Drabick and Ian J. Stearns of the Securities, Financial & Cyber Fraud Unit prosecuted the case.
The details contained in the charging document are allegations. The remaining defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
Updated November 2, 2023
Securities, Commodities, & Investment Fraud