The Securities and Exchange Commission today announced charges against Orange County, California-based Vivera Pharmaceuticals, Inc., its CEO Paul P. Edalat, and another Edalat-controlled entity, Sentar Pharmaceuticals, for an alleged offering fraud that raised approximately $6.6 million from investors.

The SEC's complaint alleges that from May 2018 until June 2020, Vivera raised money from investors through private placements of Vivera stock. As alleged, Vivera claimed to hold an "exclusive global license" to a sublingual drug-delivery technology for the pharmaceutical use of CBD and THC. The SEC further alleges that, among other things, Vivera failed to disclose that Edalat was the controlling shareholder of both Vivera and the ostensible licensor, Sentar, and that there was an ongoing dispute around the validity of Vivera's license due to Sentar's prior conveyance of the same license to a third party. According to the complaint, in December 2018, Vivera filed a lawsuit challenging the third party's claim to the relevant license rights and lost that action in May 2020. The SEC further alleges that Sentar received $4,510,000 in purported licensing fees from Vivera and then transferred significant sums into various accounts controlled by Edalat, from which Edalat made lavish purchases, including down payments on two homes and a $425,000 luxury car.

The SEC's complaint, which was filed in the Central District of California, charges all three defendants with violating the anti-fraud provisions of Sections 17(a)(1) and (3) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The complaint also charges Vivera and Edalat with violating the anti-fraud provisions of Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against all defendants, as well as conduct-based injunctions against Vivera and Edalat, and an officer-and-director bar against Edalat.

The SEC's investigation was conducted by Robert Stillwell and Carol Kim and supervised by Finola H. Manvelian in the Los Angeles Regional Office. The SEC's litigation will be led by Stephen Kam and supervised by Gary Leung.