SEC Charges Attorney with Assisting Fraudulent Microcap Scheme
Litigation Release No. 24884 / September 3, 2020
Securities and Exchange Commission v. Peter DiChiara, Civil Action No. 1:20-cv-11645 (D. Mass. filed September 3, 2020)
The Securities and Exchange Commission today charged New York resident Peter DiChiara for his role as an attorney in an alleged scheme to manipulate and illegally sell the stock of a publicly traded company, Environmental Packaging Technologies Holdings, Inc. DiChiara has agreed to settle the charges and pay a total of $57,167.
The SEC's complaint, filed in federal court in Boston, alleges that DiChiara, working as an attorney, helped MorrieTobin and others arrange a reverse merger between a public shell company, which Tobin secretly controlled, and a private-bulk packaging company. The reverse merger allegedly left Tobin with control of nearly all of the purportedly unrestricted shares of Environmental Packaging. According to the complaint, DiChiara helped Tobin transfer his shares though a network of nominee entities to evade legal restrictions on stock sales. This enabled Tobin to sell his shares in bulk during a stock promotion, as Environmental Packaging shares more than doubled in price. The complaint also alleges that DiChiara authored false attorney opinion letters to remove restrictive legends from stock certificates held by Tobin's nominees and drafted misleading SEC filings.
DiChiara is the latest of multiple defendants charged in connection with the scheme involving Environmental Packaging. 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, including Environmental Packaging. On November 28, 2018, and August 29, 2019, the SEC charged Tobin, Milan Patel, Matthew Ledvina, Daniel Lacher, Brian Quinn, and David Skriloff with various roles in a scheme using offshore entities to hide Tobin's ownership and control over Environmental Packaging and CURE Pharmaceutical Holding Corp.
The SEC's complaint charges DiChiara with violating the registration and antifraud provisions of Sections 5(a), 5(c), 17(a)(2), and 17(a)(3) of the Securities Act of 1933. The complaint also charges DiChiara with aiding and abetting violations of the antifraud provisions of Section 17(a)(1) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations, DiChiara consented to the entry of a final judgment permanently enjoining him from future violations of the charged provisions. In addition, DiChiara has consented to a five-year penny stock bar and conduct-based injunctions that restrict his ability to prepare opinion letters and provide legal services in connection with certain unregistered offerings. DiChiara also agreed to pay a $40,000 civil penalty, $15,000 in disgorgement and $2,167 in prejudgment interest. The settlement is subject to court approval.
The SEC's investigation was conducted by J. Lauchlan Wash, Trevor Donelan, Eric Forni, David Scheffler, Rebecca Israel, Jonathan Allen, Kathleen Shields, 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, 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.