BOSTON – A Canadian national residing in Long Beach, Calif., was arrested today and charged in connection with a securities fraud scheme in which he allegedly concealed his ownership of millions of shares in two companies for which he served as the chairman of the board of directors and then secretly directed the shares’ sale, generating approximately $2.19 million in proceeds.
Avtar Singh Dhillon, 60, was charged in a criminal complaint with one count of conspiracy to commit securities fraud, one count of securities fraud and two counts of obstructing a proceeding of the U.S. Securities and Exchange Commission (SEC). Dhillon will make an initial appearance in federal court in Boston at a later date.
According to the charging document, Dhillon, while serving as the chairman of two publicly-traded microcap companies, fraudulently concealed his beneficial ownership of millions of shares in those companies through two LLC entities created and managed by his attorney. One of the companies, Arch Therapeutics, Inc., was based in Framingham, Mass. It is alleged that Dhillon and his attorney concealed Dhillon’s ownership for the purpose of secretly selling the shares for Dhillon’s benefit in contravention of securities regulations that require disclosure of such sales and that limit the ability of company insiders to quickly sell large quantities of shares. Through their scheme, Dhillon and his attorney allegedly generated approximately $2.19 million in fraudulent proceeds. Later, when giving sworn testimony before the SEC, Dhillon allegedly twice withheld from investigators his beneficial interest in the LLC entities’ accounts and lied about his awareness of whether anyone had sold shares in Arch Therapeutics.
The conspiracy charge and the securities fraud charge each provide for a sentence up to 25 years in prison, five years of supervised release and a fine of $250,000, or twice the gross gain or loss, whichever is greater. The charges of obstructing a proceeding of the U.S. Securities and Exchange Commission provide for sentences up to 20 years and five years in prison, respectively, three years of supervised release and a fine of $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
Acting United States Attorney Nathaniel R. Mendell and Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division made the announcement. The SEC and the SEC’s Boston Regional Office provided assistance with the investigation. Assistant U.S. Attorney James R. Drabick of Mendell’s Securities, Financial & Cyber Fraud Unit is prosecuting the case.
The details contained in the charging documents are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.