Avtar Singh Dhillon, a Surrey-based physician who now resides in Long Beach, California in a $12 million, 9,300-square-foot, yacht-lined waterfront home— once advertised as one of the region's most expensive residential properties, was arrested in August this year and charged in connection with a securities fraud scheme in which he allegedly concealed his ownership of millions of shares in two companies for which he served as the chairman of the board of directors and then secretly directed the shares’ sale, generating approximately $2.19 million in proceeds. While Dhillon has been charged in the US in this wide-reaching fraud scheme, little is known of his stock market dealings in Canada until this week when Glacier Media unveiled Dhillon’s stock deals in BC. Dhillon's most recent and prominent Canadian venture is a medical marijuana company that he founded with prominent Vancouver securities lawyers and family members, including his cousin Yadvinder Kallu, a convicted heroin trafficker. Dhillon has directed numerous Canadian public companies, including a high-profile Richmond-based marijuana firm called Emerald Health Therapeutics.

By DESIBUZZCanada Staff With News Files

VANCOUVER – An Indo-Canadian doctor-turned stock promoter has until the end of November to respond to charges where the US government accuses of orchestrating a $1 billion international stock fraud scheme.

Avtar Singh Dhillon, 60, a Surrey-based physician who now resides in Long Beach, California in a $12 million, 9,300-square-foot, yacht-lined waterfront home— once advertised as one of the region's most expensive residential properties, was arrested in August this year and charged in connection with a securities fraud scheme in which he allegedly concealed his ownership of millions of shares in two companies for which he served as the chairman of the board of directors and then secretly directed the shares’ sale, generating approximately $2.19 million in proceeds.

Dhillon was charged in a criminal complaint with one count of conspiracy to commit securities fraud, one count of securities fraud and two counts of obstructing a proceeding of the U.S. Securities and Exchange Commission (SEC). 

Dhillon, who made an initial appearance in federal court in Boston following the arrest, was released on a $1.5 million bond and has since turned in his passport and is monitored by authorities with a GPS ankle bracelet. 

Dhillon is a licensed medical physician specializing in internal medicine, with an office in Surrey. Over the past 25 years, he has pivoted his career toward promoting mainly health science companies and claimed to have raised more than $1 billion from investors. He's also served as past chairman of the Cannabis Canada Council and is a former member of the securities practice advisory committee to the B.C. Securities Commission.

According to the charging document, Dhillon, while serving as the chairman of two publicly-traded microcap companies, fraudulently concealed his beneficial ownership of millions of shares in those companies through two LLC entities created and managed by his attorney. One of the companies, Arch Therapeutics, Inc., was based in Framingham, Mass. 

It is alleged that Dhillon and his attorney concealed Dhillon’s ownership for the purpose of secretly selling the shares for Dhillon’s benefit in contravention of securities regulations that require disclosure of such sales and that limit the ability of company insiders to quickly sell large quantities of shares. Through their scheme, Dhillon and his attorney allegedly generated approximately $2.19 million in fraudulent proceeds. Later, when giving sworn testimony before the SEC, Dhillon allegedly twice withheld from investigators his beneficial interest in the LLC entities’ accounts and lied about his awareness of whether anyone had sold shares in Arch Therapeutics.

The conspiracy charge and the securities fraud charge each provide for a sentence up to 25 years in prison, five years of supervised release and a fine of $250,000, or twice the gross gain or loss, whichever is greater. The charges of obstructing a proceeding of the U.S. Securities and Exchange Commission provide for sentences up to 20 years and five years in prison, respectively, three years of supervised release and a fine of $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

The allegations against Dhillon are part of a much broader international pump and dump scheme alleged by American authorities to have been orchestrated by Frederick Sharp, a West Vancouver resident and former lawyer tied to the Panama Papers.

Sharp is accused of criminal conspiracy to commit securities fraud and securities fraud. Sharp and Dhillon also face various civil charges by the U.S. Securities and Exchange Commission alongside alleged co-conspirators Paul Sexton of Anmore, Jackson Friesen of Delta, Graham Taylor of Vancouver, and Zhiying Yvonne (Chen) Gasarch of Richmond, Mike Veldhuis of Vancouver and Courtney Kelln of Surrey. The U.S. Securities and Exchange Commission has also frozen dozens of bank accounts, including many in Canada, associated with the defendants, who are all presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The SEC describes the case as "a sophisticated, multi-year, multinational attack on the United States financial markets and retail United States investors by foreign and domestic actors." 

The group is accused of hiding their beneficial ownership of millions of insider shares through a web of local and offshore shell companies and brokerage accounts controlled by Sharp. 

Acting United States Attorney Nathaniel R. Mendell and Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division made the announcement back in early August. The SEC and the SEC’s Boston Regional Office provided assistance with the investigation. Assistant U.S. Attorney James R. Drabick of Mendell’s Securities, Financial & Cyber Fraud Unit is prosecuting the case.

The details contained in the charging documents are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

While Dhillon has been charged in the US in this wide-reaching fraud scheme, little is known of his stock market dealings in Canada until this week when Glacier Media unveiled Dhillon’s stock deals in BC.

The Glacier Media reports states that Dhillon's most recent and prominent Canadian venture is a medical marijuana company that he founded with prominent Vancouver securities lawyers and family members, including his cousin Yadvinder Kallu, a convicted heroin trafficker.

Dhillon has directed numerous Canadian public companies, including a high-profile Richmond-based marijuana firm called Emerald Health Therapeutics.

But before taking control of the publicly-traded and licensed marijuana producer in April 2015, Dhillon first founded a private investment firm in June 2013 called Emerald Health Sciences (first named Medna Biosciences), reported Glacier Media. 

He did so with his friend and business associate Jim Heppell, a prominent Vancouver lawyer, who has directed over 20 Canadian companies, including many involving Dhillon as a director or shareholder. Heppell also advised the B.C. Securities Commission while working for Catalyst Corporate Finance Lawyers. Heppell worked as president of BC Advantage Funds until 2015, a year before it conducted a wind up.   

The other founders of Emerald Health Sciences were Dhillon's nephew Maheep Dhillon and his cousin Yadvinder Kallu, who was sentenced to nine years in a New York federal prison in 1999 after being caught running drugs and cash in Los Angeles.

In 1998, Kallu, then 27, was caught moving heroin and cash for a major international drug trafficking ring originating from Pakistan that utilized high-profile South Asian Vancouver gangsters, including leader Ranjit Singh Cheema.

Kallu and his associates Mandeep Dosanjh and David Nair all pleaded guilty to their crimes. Kallu was sentenced to nine years in prison, but it's understood he only spent three years in a New York federal prison. 

Once released from prison, Kallu went back to his family's blueberry farm in Richmond and appears to have established a career in horticulture.

Emerald Health Sciences was to use Dhillon's business acumen and Kallu's horticulture experience to produce and sell medical marijuana via a reverse takeover of Heppell's public shell company Venturi Ventures.

However, without a Health Canada production licence a quicker option unfolded when Heppell's former Catalyst law firm partner David Raffa introduced them to his licensed private medical marijuana producer Thunderbird Biomedical Inc., based in Victoria.

In July 2014, Thunderbird went public in a reverse takeover and in April 2015, Emerald Health Sciences bought 20.16 million shares of it at 21-cents per share, totalling $4.23 million. With 44% of the company's shares, Emerald Health Sciences became the majority stakeholder and controlling entity of the now publicly traded and licensed company.

Heppell, Raffa, Dhillion and his nephew Punit Dhillon took over the public company's board and renamed it Emerald Health Therapeutics. At this point, Dhillon was in charge of the public company (Therapeutics) and the private investment firm (Sciences) that controlled it. 

From January 2018 to May 2018, corporate filings show it sold six million shares for between $5 and $8 each.

Finally, in December 2019, after the stock tumbled, Emerald Health Sciences sold its last tranche of shares; 9.6 million 57-cent shares for $5.5 million.

Between that time, in May 2019, Punit Dhillon stepped down from the company's board after the company announced there was a security clearance issue with Health Canada.

Despite the company reporting nearly $200 million in losses since its launch in 2015 while under Dhillon's direction, corporate filings show Emerald Health Sciences made an estimated $23 million in net earnings for its investors.

Among those investors are several of the individuals accused in the alleged scheme and numerous offshore accounts, including some linked to those defendants, as outlined in a company securities registry submitted in a B.C. Supreme Court affidavit.

Three Swiss holding companies associated with Knox and Sharp — Morris Capital Inc., Trius Holdings Ltd. and Varese Capital Inc. — were allocated hundreds of thousands of shares, according to the registry. This includes transfers of 250,000 and 100,000 shares from Vancouver accountant Shirazali Jumani and 100,000 shares from a Cayman Islands account belonging to Anson Investments Master Fund, which is controlled by hedge fund manager and short-seller Moez Kassam, reported Glacier Media.

Sexton's Nova Trek Capital Inc., Friesen's Ardent Strategies Corp., and Graham Taylor were allocated hundreds of thousands of shares.

The most significant chunk of shares in Sciences was first registered in 2013 when Dhillon distributed millions of founders' shares for 0.00001 cents.

They were distributed as so:

Avtar Dhillon: 4.28 million shares

Shirazali Jumani (accountant): 2.66 million shares

Jim Heppell: 2.25 million shares (split between family members)

Maheep Dhillon: 1.07 million shares

Gaetano Morello (scientific advisor): 342,853 shares

Yadvinder Kallu's mother: 1.39 million, placed in a trust called the Emerald Family Trust

Two days after Dhillon's arrest, he stepped down as chairman of Emerald Health Therapeutics. The company stated it "is not aware of any improper trading in Emerald securities and no allegations have been made against any other person associated with Emerald, including any of its officers or other directors. The Company and its legal counsel are currently considering whether there are any additional steps they can take in the best interests of the Company and its shareholders," reported Glacier Media.

With Files Courtesy Glacier Media