Litigation Releases (Morrie Tobin et al.)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26163 / October 18, 2024

Securities and Exchange Commission v. Morrie Tobin et al.

, Civil Action No. 1:18-CV-12451 (D. Mass. filed November 27, 2018)

SEC Obtains Judgments Against Defendants in a Fraudulent Microcap Manipulation Scheme

The Securities and Exchange Commission announced today that, on October 17, 2024, the U.S. District Court for the District of Massachusetts entered final judgments against California resident Brian Quinn and New York resident David Skriloff in an SEC case alleging that they participated in a fraudulent scheme to profit from the manipulation and illegal sale of stock of a publicly traded company, Environmental Packaging Technologies Holdings, Inc. ("Environmental Packaging"). Among other things, they were each ordered to pay $230,464 in civil penalties. The court previously entered judgments against four other defendants, including a judgment against Swiss resident Daniel Lacher in 2022 that, among other things, ordered him to pay a total of over $479,000 in disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.

The SEC's complaint was filed in 2018 against four defendants, including Lacher, and was later amended in 2019 to add Quinn and Skriloff as defendants. The complaint alleged that Quinn facilitated the reverse merger between a "public shell company" secretly controlled by co-defendant Morrie Tobin and a privately held operating company of which Skriloff was the Chief Executive Officer. The complaint further alleged that after the reverse merger, Quinn arranged and oversaw a $1 million promotional campaign designed to increase demand for Environmental Packaging's publicly traded stock and directed certain offshore asset managers to sell stock held by Tobin for a profit. According to the complaint, Skriloff became the CEO of Environmental Packaging and made misstatements in public reports filed with the SEC about the reverse merger and the company's connection to the promotional campaign. The complaint alleged that Lacher, an offshore asset manager, facilitated various schemes, including the Environmental Packaging scheme, by utilizing a network of nominee entities to secretly hold control persons' shares, arranging for the deposit of those shares with brokers, selling those shares to investors, and sharing in the profits. The SEChalted trading in the securities of Environmental Packagingon June 27, 2017. According to the complaint, Quinn, Skriloff, and Lacher participated in efforts to cover up the fraud and obstruct the investigation after the trading halt.

The SEC's complaint charged Quinn, Skriloff, and Lacher with violating the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5(a) and (c) thereunder. It also charged Quinn with violating the securities registration provisions of Sections 5(a) and (c) of the Securities Act. The complaint charged Skriloff with violating Section 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5(b) thereunder, aiding and abetting the other defendants' violations of Section 10(b) of the Exchange Act and Sections 17(a)(1) and (3) of the Securities Act, and aiding and abetting Environmental Packaging's violation of Section 17(a)(2) of the Securities Act.

Without admitting or denying the allegations, Quinn consented to the entry of a final judgment that includes injunctive relief for all charged provisions and the penny stock bar that were previously ordered by the court in a July 2022 judgment and orders him to pay a $230,464 civil penalty. Without admitting or denying the allegations, Skriloff consented to the entry of a final judgment that includes injunctive relief for all charged provisions and the penny stock and officer and director bars that were previously ordered by the court in an August 2024 judgment and orders him to pay a $230,464 civil penalty. The court previously entered a final judgment by default against Lacher on April 22, 2022 that included injunctive relief for all charged provisions, a penny stock bar, and an order to pay disgorgement of $53,658.73, pre-judgment interest of $11,641.93, and a civil penalty of $414,366.

The court previously entered judgments in 2021 against defendants Tobin, Matthew Ledvina, and Milan Patel, and, with the entry of the judgments against Quinn and Skriloff, the SEC's case is now concluded.

The SEC's litigation was conducted by David Scheffler, Kathleen Shields, J. Lauchlan Wash, and Amy Gwiazda of the SEC's Boston Regional Office.