SEC Obtains Final Judgments Against Three Defendants in International Microcap Manipulation Scheme
Litigation Release No. 25072 / April 19, 2021
Securities and Exchange Commission v. Morrie Tobin et al., Civil Action No. 1:18-CV-12451 (D. Mass. filed November 27, 2018)
On April 16, 2021, the U.S. District Court for the District of Massachusetts entered final judgments against three defendants in a previously-filed SEC enforcement action alleging a scheme to profit from the manipulation and illegal sale of stock of two publicly traded companies.
According to the SEC's complaint, Morrie Tobin, a California resident, secretly controlled and owned substantially all of the stock in two public companies, Environmental Packaging Technologies Holdings, Inc. and CURE Pharmaceutical Holding Corp, and organized a scheme to sell that stock without disclosing his identity The complaint alleged that Milan Patel and Matthew Ledvina, both formerly attorneys at an international tax law firm, facilitated Tobin's scheme by hiding Tobin's ownership and control over the companies. As alleged, Patel and Ledvina deposited Tobin's stock in accounts in the names of nominee entities at offshore firms including Wintercap SA, a Swiss-based company run by U.K. citizen Roger Knox. Tobin and others allegedly paid promoters to tout the companies' stock, and when the stock rose following the touting, Tobin sold shares for a profit. On October 2, 2018, the SEC filed an emergency action and obtained an asset freeze against 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 and CURE.
Without admitting or denying the SEC's allegations, Tobin, Patel, and Ledvina consented to the entry of final judgments that enjoin them from future violations of the securities registration provisions of Section 5(a) and 5(c) of the Securities Act of 1933 and the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. In addition, Tobin, Patel, and Ledvina consented to penny stock bars.
In parallel criminal actions concerning the same conduct in the United States District Court for the District of Massachusetts, Tobin, Patel, and Ledvina pleaded guilty to conspiracy to commit securities fraud. Tobin was sentenced to a term of imprisonment of 12 months and a day, ordered to forfeit $4 million, and fined $100,000. Patel was sentenced to a term of imprisonment of 15 months and fined $50,000. Ledvina was sentenced to a term of probation and fined $50,000. In addition, Tobin, Patel, and Ledvina were ordered to pay $1,908,583 in restitution on a joint and several basis.
The SEC's investigation was conducted by J. Lauchlan Wash, Trevor Donelan, David Scheffler, Rebecca Israel, Jonathan Allen, Eric Forni, 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.