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A former Murrieta lawyer agreed to a $41,000 payment to the Securities and Exchange Commission to end the commission’s lawsuit alleging she committed securities fraud.

The SEC alleged Jillian Sidoti, formerly of Trowbridge & Sidoti LLP, had misrepresented a shell company. while serving as the company’s counsel, to generate proceeds of $7.2 million in 5.2 million fraudulent penny stock sales.

Sidoti denied the charges, and she does not admit guilt to the SEC’s allegations in the judgment she agreed to. She has not returned Follow Our Courts’ request for comment.

The former attorney will pay $14,000, which would equal the net profits of the alleged conduct; $4,600 in interest; and a penalty of $22,000.

She is also barred from offering penny stock for five years and from providing professional legal services in relation to securities for five years.

From 2012 to 2017, Sidoti served as legal counsel to Blake Insomnia Therapeutics, which the SEC claims was created by two individuals for the main purpose of fraudulently selling the stocks.

From 2012 to 2017, Sidoti served as legal counsel to Blake Insomnia Therapeutics, which the SEC claims was created by two individuals for the main purpose of fraudulently selling the stocks. The individuals were identified in court documents only as Mr. Critz and Mr. Gavin.

“Specifically, Sidoti knew that the founders of Blake had no intention of pursuing the Company’s stated business plan, and she knew that the purported investors named in the documents she filed had not actually invested any money; as Blake’s founders told Sidoti, they reimbursed those purported investors for their ‘purchases’ of shares,” the SEC complaint said.

Critz and Gavin then, on Sidoti’s advice, controlled Blake through a network of foreign companies, the SEC claimed.

Sidoti then prepared legal opinions that falsely described Blake, contained misleading statements about the shares’ control and lied about the company’s promotional campaign with the goal to illegally dump Blake’s shares, the SEC claimed.

The SEC based their case on a call that Critz and Gavin illegally recorded while in consultation with Sidoti in 2012, court records show. 

In the call, Critz said he wanted to start two businesses a week for six weeks, and described the businesses as shells.

Sidoti expressed confidence in her legal structure.

“The SEC is not going to be the problem, I’m going to tell you that right now,” Sidoti said.

Sidoti believed that making a digital-based company with only a website would make the company non-nominal.

“Yeah, that’s why your internet companies are probably going to be the most — the ones that we can most successfully avoid shell status with because you can say well, we have the website, that’s our only asset,” Sidoti said.

The company, Blake, had started as a “Book It Local Inc.” in August, 2012, claiming to offer booking for concerts, then changed its name to BioHemp International, Inc. in June, 2019 and claiming to work in cannabis, before changing to Blake Insomnia Therapeutics, Inc., according to the SEC complaint.

In her reply, Sidoti said there was no control group, and that her legal work did not misrepresent the company. She also denied a continuity between the company she helped set up in 2012 and Blake.

“Parts of the Amended Complaint are based on excerpts of a single phone call that was recorded illegally and contains hearsay. The Amended Complaint is misleading because it intentionally omits and ignores numerous other related communications that refute the contents of the recorded call,” Sidoti’s response reads.

Sidoti had also written a book in 2016: The Crowdfunding Myth: Legally and Effectively Raising Money for Your Business.

Her law license, won in 2006, became inactive Dec. 15.

She claimed on her LinkedIn to have structured funds for “real estate giants Grant Cardone, Tarek El Moussa of Flip or Flop, David Gross (Nipsey Hussle), and the founders of Bigger Pockets.” She also claims to have sold her law firm, Crowdfunding Lawyers.

Case information

Case number 5:20-cv-02178

California Central District Judge Jesus Bernal presided.

Mitchell J. Albert and Robert Brendan Ericson of Torrance’s Albert & Will defended Sidoti.

Alexandra Lavin, Donald Searles, Eric Forni, Kathleen Shields and Rebecca Israel prosecuted for the U.S. Securities and Exchange Commission.

Read the SEC’s complaint here.

Read Sidoti’s response here.

Read the transcript of the phone call here.

Read the judgment here.

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