The U.S. Securities and Exchange Commission has sanctioned Mount Kisco lawyer Peter DiChiara for helping a company owner secretly pump and dump his stock.
An SEC administrative order on Sept. 21 banned DiChiara, 57, from practicing before the agency for three years.
On Sept. 1, a federal judge in Boston barred him for five years from providing legal services to anyone selling securities, ordered him to permanently restrain himself from violating anti-fraud regulations and fined him $57,168.
DiChiara helped Morrie Tobin of Los Angeles devise a scheme that “appeared to be ordinary trading,” according to the SEC civil complaint filed last year in Boston federal court, but “was actually a massive dump of shares by a company insider … seeking to profit at the expense of defrauded investors.”
DiChiara began working for Tobin in 2016 to set up a reverse merger in which a private company becomes a public company by buying a public shell company.
A reverse merger can create the appearance of legitimate financial activity, according to the SEC complaint. But in this case Tobin secretly controlled the shell company, ended up secretly owning the new company, Environmental Packaging Technologies, and dumped his shares for a profit.
DiChiara, according to the SEC, “acted on Tobin’s behalf and used his position as an attorney to assist Tobin with critical parts of the scheme.”
He helped Tobin conceal ownership of the companies and evade SEC regulations. Before the merger, he helped Tobin transfer $1 million to an offshore stock promotions company hired to tout the Environmental Packaging stock.
The promoter produced a 16-page glossy brochure, including statements such as “put up to 1,118% in your pocket!” that was mailed to thousands of U.S. investors.
DiChiara admitted that the allegations in the SEC lawsuit are true, according to the final judgment, and he consented to the sanctions imposed in both SEC actions.
Tobin pleaded guilty last year to criminal securities fraud. He was sentenced to 12 months in prison and ordered to forfeit $4 million and pay a $100,000 fine.
