SEC Obtains Judgment Against Defendant in Microcap Fraud Scheme

February 3, 2025/US SEC

On January 21, 2025, the Securities and Exchange Commission obtained a final judgment against defendant Joseph A. Padilla in an action filed in 2023 alleging a fraudulent microcap stock selling scheme.

According to the Commission’s complaint, filed in the United States District Court for the District of Massachusetts, Padilla knowingly enabled illegal stock sales by people who secretly held enough of the stock of various small publicly-traded companies to dominate the market for their stock. The complaint alleges that Padilla hid those individuals’ identities by selling stock for them through offshore brokerage accounts that he controlled, but that he opened in different names. The complaint further alleges that Padilla traded in his own brokerage account and accounts of family and friends to manipulate stock prices in support of the scheme. Padilla also allegedly enlisted a stock trader at a registered broker-dealer firm to facilitate stock trading as part of the scheme. According to the complaint, the stock sales coincided with stock promotions or news announcements intended to gain investor interest.

Padilla consented to a final judgment holding him liable for disgorgement of $3,139,685 and prejudgment interest of $20,975, offset by $3 million that the Court ordered Padilla to pay in a related criminal case. Padilla also consented to the judgment permanently enjoining him from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The judgment also permanently barred Padilla from participating in an offering of penny stock and permanently enjoined Padilla from participating in the issuance, purchase, offer, or sale of any security other than purchasing or selling securities listed on a national securities exchange for his own personal accounts.

The Commission previously obtained consent judgments against defendant Kevin Dills and four relief defendants. The Commission’s case remains pending against two relief defendants. The litigation is being handled by Michael Moran, Kathleen Shields, Ryan Murphy, and Amy Gwiazda in the Boston Regional Office.

For additional information, see Litigation Release No. 25745 (June 14, 2023) and Litigation Release No. 25952 (March 20, 2024).

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