On August 4, Avtar Dhillion, a Vancouver-based marijuana stock promoter, was arrested at his residence in Long Beach, California. According to the U.S. Attorney’s Office of Massachusetts, Dhillon, “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.” Dhillon is alleged to have used a lawyer to conceal ownership of the shares for Boston-based cannabis company Arch Therapeutics and New Jersey-based OncoSec Medical Inc., two microcap biotechnology companies he was chairman of the board for between March 2011 and April 2020.
Directors are required to disclose all the shares they own and have restrictions on their sales. Concealing the insider sales could have the effect of not negatively impacting the share price. Investigators with the Federal Bureau of Investigation (FBI) plead Dhillon and his lawyer made false representations for millions of shares. His lawyer put those shares into two LLCs then had another law firm provide a legal opinion (based on alleged misrepresentations) to a broker that the shares could be deposited into a brokerage account without restrictions.
Upon the subsequent sale, the lawyer transferred the cash to suspected beneficiaries of Dhillon. The FBI’s affidavit states, “The timing and manner of the sales, along with the beneficiaries of the proceeds, reflect that Dhillon was closely involved with the sales and that the proceeds were distributed primarily for Dhillon’s benefit.” It continues, “Brokerage records, phone records, and emails indicate that [the lawyer] was thereafter in frequent and close contact with Dhillon immediately before placing sale orders for Arch Therapeutics shares.” From his supposedly hidden shares account of Arch Therapeutic share sales, Dhillon allegedly accrued $1.3 million.
In his purportedly hidden OncoSec share sales, Dhillon supposedly generated $821,000 with a similar process. The FBI also believes that Dhillon obstructed the SEC investigation saying, “based on the evidence described herein, I have probable cause to believe that…Dhillon obstructed the SEC’s Boston investigation by providing false and incomplete information regarding his beneficial interest in the shares sold.” This level of white-collar crime is a prime example of how even with marijuana being legal, you can still go to jail for it.