On September 14, 2020, the United States District Court in Boston entered final judgments against M. Jay Herod and Kenneth Stromsland, who were previously charged by the SEC with stock manipulation and with defrauding investors in Boston-based biotech company PixarBio Corporation.

According to the SEC's complaint, filed in April 2018, Stromsland, PixarBio's Chief Information Officer and VP of Investor and Public Relations, and Herod, an information technology consultant and friend of PixarBio CEO Frank Reynolds, repeated false statements to prospective investors that were made by Reynolds about the company's finances and the FDA approval status of a drug. Stromsland and Herod also allegedly provided potential investors promotional materials written by Reynolds that included the false statements. The complaint also alleged that Reynolds and Herod engaged in a fraudulent scheme to acquire and merge PixarBio with a publicly traded company and that Reynolds, Herod, and Stromsland engaged in a fraudulent scheme to secretly manipulate the sales of shares in the new entity. The SEC's litigation against PixarBio and Reynolds remains pending.

The U.S. Attorney's Office for the District of Massachusetts filed a parallel criminal action against Reynolds, Herod, and Stromsland, arising from the same conduct alleged in the SEC's complaint and charging each of them with securities fraud and obstructing the SEC's investigation. Herod and Stromsland pled guilty, and Reynolds was found guilty by a federal jury. The court sentenced them in February 2020.

Stromsland and Herod have consented to entry of the final judgments in the SEC's civil action, which permanently enjoin them from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, the registration provisions of Sections 5(a) and 5(c) of the Securities Act, and the market manipulation provisions of Section 9(a) of the Exchange Act. The final judgments impose penny stock bars against Stromsland and Herod and order them to surrender their shares of PixarBio. The final judgment against Stromsland also permanently enjoins him from violating the broker-dealer registration provisions of Section 15(a) of the Exchange Act and permanently bars him from serving as an officer or director of a public company. Stromsland has also agreed to settle a follow-on administrative proceeding that bars him from the securities industry. Stromsland and Herod consented to pay disgorgement plus prejudgment interest of $27,500 and $126,845, respectively, which the court deemed satisfied by the restitution amounts they will pay in the related criminal proceeding.

The SEC's ongoing case against PixarBio and Reynolds is being handled by Jonathan Allen, Sofia Hussain, Deena Bernstein, and Amy Gwiazda of the Boston Regional Office, with assistance from Robert Nesbitt in the SEC's Washington, D.C. Office of Investigative and Market Analytics.