(CMR) Two California men who were criminally indicted in the United States for their alleged involvement in a sophisticated securities fraud scheme that generated over $150 million in illicit profits with the help of a Cayman Islands brokerage, Valor Capital, have been sued by the U.S. Securities and Exchange Commission (SEC).
Joseph A. Padilla (53) was charged with 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. Kevin C. Dills (66) was charged with one count of conspiracy to commit securities fraud and one count of securities fraud.
According to the indictment, Padilla is a former stockbroker who was barred from the securities industry in 2012 by the SEC. Dills is the former owner of a broker-dealer who was barred from the securities industry in 2001 by the SEC. Between 2020 and 2022, Padilla allegedly conspired with Dills and others to commit securities fraud by facilitating and participating in pump-and-dumps involving the concealed control of the shares of penny-stock companies.
The indictment alleges that, between October 2020 and July 2022, Padilla and Dills participated in a lucrative pump-and-dump 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, Dills allegedly used two companies under his control to exercise convertible debt issued by ONPH and acquire nearly all of ONPH’s free-trading shares.
Dills, who allegedly used the two companies to disguise that he was an affiliate of ONPH, then transferred the ONPH shares to nominees of Padilla, who in turn, caused the shares to be transferred to a broker-dealer in the Cayman Islands with which he had a close association.
Padilla and several of his associates then allegedly engaged in manipulative trading in ONPH to drive up the company’s stock price, after which Padilla allegedly began dumping ONPH shares to unsuspecting investors in Massachusetts and throughout the United States, while Dills caused ONPH to issue positive press releases. According to court documents, the scheme generated more than $150 million in illicit profits, $19 million of which Dills allegedly received through his companies for his role in the scheme.
The indictment further alleges that, between January 2020 and April 2021, Padilla participated in a pump-and-dump fraud 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 allegedly orchestrated the manipulation of Charlestowne’s stock price using his brokerage account and those of several other individuals. He then allegedly facilitated the sale of millions of Charlestowne’s shares at pumped-up prices to unsuspecting investors in Massachusetts and throughout the United States, generating over $7 million in illicit profits.
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. Based on this alleged conduct, Padilla was arrested in January 2023 for violating his terms of release.