California Attorney Pleads Guilty to Selling Unregistered Securities

BOSTON – A California attorney pleaded guilty yesterday in federal court in Boston in connection with the illegal sale of over $1.3 million worth of unregistered shares of a Massachusetts-based health care company. 

Daniel V. Martinez, 63, of Yuba City, Calif., pleaded guilty to one count of sale of unregistered securities. U.S. District Court Judge Patti B. Saris scheduled sentencing for April 13, 2023. Martinez was charged by an Information on Sept. 30, 2022.

Between 2013 and 2016, Martinez served as a real-estate attorney for Avtar Singh Dhillon, who was then chairman of the Massachusetts-based biotechnology company, Arch Therapeutics, Inc. Dhillon and Martinez placed 2.75 million Arch Therapeutics shares that Dhillon beneficially owned into a limited liability company that Martinez created and for which Martinez was the sole manager. At Dhillon’s direction, Martinez then sold the shares in the open market without a valid exemption under the relevant securities laws and distributed the approximately $1.34 million in proceeds. Martinez distributed the proceeds primarily to third parties for Dhillon’s benefit, taking a small portion directly for himself. 

On Dec. 8, 2022, Dhillon pleaded guilty to one count of willful failure to disclose stock sales, one count of aiding and abetting the sale of unregistered securities, and one count of touting compensation nondisclosure conspiracy before U.S. Senior District Court Judge Douglas P. Woodlock, who scheduled sentencing for April 18, 2023.

The charge of sale of unregistered securities provides for a sentence up to five years in prison, three years of supervised release and a fine of $10,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.

United States Attorney Rachael S. Rollins and Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Office made the announcement. Valuable assistance was provided by SEC’s headquarters and Boston regional office. Assistant U.S. Attorney James R. Drabick of Rollins’ Securities, Financial & Cyber Fraud Unit is prosecuting the case.