Litigation Releases (American Patriot Brands, Inc.; Urban Pharms, LLC; TSL Distribution, LLC; DJ&S Property #1, LLC; Robert Y. Lee; Brian L. Pallas)

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 26587 / July 17, 2026

Securities and Exchange Commission v. American Patriot Brands, Inc., et al., No. 2:23-cv-05379 (C.D. Cal.) (filed Mar. 16, 2023)

SEC Obtains Final Judgment as to Cannabis Company, its Subsidiaries, CEO, and COO Charged in Fraudulent Offering

On July 10, 2026, the U.S. District Court for the Central District of California entered a final judgment as to American Patriot Brands, Inc. (APB), a cannabis company, APB's CEO Robert Y. Lee, APB's COO Brian L. Pallas, and APB's subsidiaries Urban Pharms, LLC (Urban Pharms), TSL Distribution, LLC (TSL), and DJ & S Property #1, LLC (DJ&S) in connection with previously-filed fraud charges.

The final judgment permanently enjoins APB, Urban Pharms, TSL, DJ&S, Lee, and Pallas from further violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; permanently enjoins Lee and Pallas from participating in the issuance, purchase, offer, or sale of securities, except for purchases or sales for their personal accounts; prohibits Lee and Pallas from acting as an officer or director of a public company; orders APB, Urban Pharms, TSL, and DJ&S jointly and severally to pay disgorgement of $17,786,703, together with prejudgment interest thereon in the amount of $6,202,777; orders APB and Urban Pharms each to pay a civil penalty of $4,729,004; orders TSL to pay a civil penalty of $2,364,502; orders DJ&S to pay a civil penalty of $1,182,251; orders Lee to pay a total of $6,399,792, consisting of disgorgement of $2,687,061, prejudgment interest thereon in the amount of $1,025,670, and a civil penalty of $2,687,061; and orders Pallas to pay a civil penalty of $472,902. The final judgment separately rules in favor of Relief Defendant Castro Business Enterprises, LLC (CBE) with respect to the Commission's claim of unjust enrichment alleged as to CBE. The final judgment follows the Court's June 16, 2025 order granting the SEC's motion for partial summary judgment and its July 10, 2026 amended order granting in part and denying in part the SEC's motion for remedies and entry of final judgment.

Previously, on March 13, 2026, the Court entered a final judgment by consent as to J. Bernard Rice, APB's alleged former CFO. The Court also previously dismissed the SEC's unjust enrichment claims as to Relief Defendants Puerto Rico One Corporation and Legion Accounting Services, Inc. pursuant to a stipulation filed by the parties.

The entry of the final judgment concludes the litigation.

The SEC's litigation was led by Eugene Hansen and Samantha Williams, substantially assisted by Senior Accountant Jamie Wohlert, and supervised by James Carlson.