Frederick L. Sharp et al.,

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 25881 / October 13, 2023

Securities and Exchange Commission v. Frederick L. Sharp et al., No. 1:21-cv-11276 (D. Mass. filed August 5, 2021)

SEC Obtains Final Judgment Against Participant in International Microcap Fraud Schemes

On October 11, 2023, the U.S. District Court for the District of Massachusetts entered a final judgment against California resident Avtar S. Dhillon. The SEC charged Dhillon and eight other defendants for their roles in fraudulent schemes that collectively generated hundreds of millions of dollars from unlawful stock sales and caused significant harm to retail investors in the United States and around the world. Among other relief, the judgment orders Dhillon to pay more than $10 million.

According to the SEC’s complaint, Canadian resident Frederick Sharp masterminded a complex scheme from 2011 to 2019 in which he and his associates – Canadian residents Zhiying Yvonne Gasarch and Courtney Kelln – enabled control persons of microcap companies, whose stock was publicly traded in the U.S. securities markets, to conceal their control and ownership of huge amounts of the stock and then surreptitiously dump the stock into the U.S. markets, in violation of federal securities laws. The complaint alleges that one group of control persons, comprising Canadian residents Mike K. Veldhuis, Paul Sexton, and Jackson T. Friesen, frequently collaborated with Sharp to sell massive stock positions while hiding their control positions and stock promotional activities from the investing public. Dhillon, who chaired the boards of directors of four of the public companies whose stocks were fraudulently sold during the schemes, was allegedly complicit with this group of control persons, as well as with Canadian resident Graham R. Taylor. Dhillon allegedly reaped millions in illicit proceeds from those illegal sales. According to the complaint, Maryland resident William T. Kaitz worked as a promoter and allegedly touted stocks that Veldhuis, Sexton, and Friesen simultaneously planned to sell, while concealing their roles.

Dhillon has consented to a final judgment that permanently enjoins him from violating Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b), 13(d), and 16(a) of the Securities Exchange Act of 1934, and Rules 10b-5, 13d-2, and 16a-3 thereunder. Dhillon’s judgment imposes a penny stock bar and orders him to pay disgorgement of $9,143,548 and prejudgment interest of $1,303,236, with an offset against his disgorgement amount for $1,493,500 Dhillon has agreed to pay to the U.S. Attorney’s Office for the District of Massachusetts in the U.S. v. Dhillon criminal action. 

The court previously entered a judgment by default against Sharp that, among other relief, ordered him to pay more than $50 million, and judgments by consent against Taylor and Kaitz. The court entered judgments against Kelln and Veldhuis, in June 2023, that imposed injunctions and penny stock bars with any monetary relief to be determined by the court at a later date. The court entered a judgment against Sexton on September 12, 2023 in which Sexton agreed not to contest his liability with any injunctive and monetary relief to be determined by the court at a later date. On September 27, 2023, after a ten-day trial, a jury found Gasarch liable for violating Section 17(a)(3) of the Securities Act and aiding and abetting violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder and Sections 17(a)(1) and (3) of the Securities Act. The jury further found Friesen liable for violations of Sections 10(b) and 13(d) of the Exchange Act and Rules 10b-5(a) and (c) and 13d-1 thereunder and Sections 5(a) and (c) and 17(a)(1) and (3) of the Securities Act. 

The matter was handled by Kathleen Shields, David London, Alfred Day, and Nita Klunder of the Boston Regional Office.

• SEC Judgment