SEC v. David Stephens; Donald Linn Danks; Jonathan Destler; Robert Lazerus; Daniel Solomita; and 8198381 Canada, Inc., No. 3:22-cv-01483, Southern District of New York (Sept. 30, 2022) — Complaint

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AMY HARMAN BURKART (Mass Bar No. 651828)
Email:  [email protected]
KATHLEEN BURDETTE SHIELDS (Mass Bar No.  637438)
Email: [email protected]
WILLIAM J. DONAHUE (Mass Bar No. 631229)
Email:  [email protected]
ALICIA REED (NY Bar No. 4913596)
Email:  [email protected]
AMY GWIAZDA (Mass Bar No. 663494)
Email:  [email protected]
Attorneys for Plaintiff
Securities and Exchange Commission
Boston Regional Office
33 Arch St., 24th Floor
Boston, MA 02110
Telephone:  (617) 573-8900
Facsimile:  (617) 573-4590
Local Counsel
KATHRYN WANNER (CA Bar. No. 269310)
Email: [email protected]
Securities and Exchange Commission
444 S. Flower St., Suite 900
Los Angeles, CA  90071
Telephone:  (323) 965-3998
Facsimile: (213) 443-1904
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
vs.
DAVID STEPHENS, DONALD LINN
DANKS, JONATHAN DESTLER, and
ROBERT LAZERUS,
Defendants, and
DANIEL SOLOMITA and 8198381
Canada, Inc.
Relief Defendants.
Case No.
COMPLAINT
'22CV1483DEBAJB

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Plaintiff Securities and Exchange Commission (“SEC”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to Sections
20(b), 20(d) and 22(a) of the Securities Act of 1933 (“Securities Act”) [15
U.S.C. §§ 77t(b), 77t(d)(1) & 77v(a)], and Sections 21(d), 21(e) and 27(a) of the
Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d)(1),
78u(d)(3)(A), 78u(e) & 78aa(a)].
2. David Stephens, Donald Linn Danks, Jonathan Destler, and
Robert Lazerus (collectively the “Defendants”) have, directly or indirectly, made
use of the means or instrumentalities of interstate commerce, of the mails, or of
the facilities of a national securities exchange in connection with the
transactions, acts, practices and courses of business alleged in this complaint.
3. Venue is proper in this district pursuant to Section 22(a) of the
Securities Act [15 U.S.C. § 77v(a)], and Section 27(a) of the Exchange Act [15
U.S.C. § 78aa(a)], because certain of the transactions, acts, practices and courses
of conduct constituting violations of the federal securities laws occurred within
this district.  In addition, venue is proper in this district because Defendants
Danks, Destler, and Lazerus reside in this district.
SUMMARY
4. This is a securities enforcement action.  From at least 2014 to at
least November 2018 (the “Relevant Period”), Stephens, Danks, and Destler
engaged in a deceptive scheme to sell publically traded stock in Loop Industries,
Inc. (“Loop”), while concealing their ownership of the stock and connections
with the company.  Lazerus worked with the group to further the scheme by
helping to increase demand for Loop stock by promoting it and brokering sales
to a number of investors, including to an elderly investor who invested millions

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of dollars in Loop at the same time that the group was covertly selling the stock.
5. In the course of the scheme, Stephens, Danks, Destler, and
Lazerus all worked to further the fraud by engaging in deceptive conduct—
including by seeking to evade securities law disclosure, registration, and
reporting requirements—to conceal their ownership of Loop stock.  Danks was a
member of the Board of Directors of Loop, and Danks and Destler made specific
material misrepresentations to brokerage firms to conceal Danks’ connections to
the company.  In addition, Lazerus failed to meet the broker registration
requirements of the securities laws by regularly selling Loop securities without
registering with the Commission as a broker.
6.   As a result of the Defendants’ deceptive scheme, investors
buying Loop stock during the Relevant Period were deprived of important
information: (1) that Stephens, Danks, and Destler were working as a
coordinated group to hide their ownership and collective control of significant
amounts of Loop stock; and (2) that members of the group, assisted by Lazerus,
were encouraging others to buy Loop stock at the same time that they were
surreptitiously selling it.
7. Over the Relevant Period, working together, these Defendants
generated millions of dollars in proceeds from fraudulently selling Loop stock.
8. As a result of their conduct alleged herein, Stephens, Danks,
Destler, and Lazerus violated Sections 17(a)(1) and 17(a)(3) of the Securities
Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c)
thereunder;  Danks and Destler violated Section 10(b) of the Exchange Act and
Rule 10b-5(b) thereunder; and Lazerus violated Section 15(a) of the Exchange
Act.
9. The Commission seeks a permanent injunction against the
Defendants, enjoining them from engaging in transactions, acts, practices, and
courses of business of the type alleged in this Complaint, disgorgement of all ill-

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gotten gains from the unlawful conduct set forth in this Complaint pursuant to
Section 21(d)(7) of the Exchange Act [15 U.S.C. §78u(d)(7)], together with
prejudgment interest, civil penalties pursuant to Section 20(d) of the Securities
Act [15 U.S.C. §77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C.
§78u(d)(3)]; an order barring all Defendants from participating in any offering of
a penny stock, pursuant to Section 20(g) of the Securities Act [15 U.S.C.
§77t(g)] and/or Section 21(d) of the Exchange Act [15 U.S.C. §78u(d)]; an order
barring Stephens, Danks, and Destler from serving as an officer or director of a
public company pursuant to Section 20(e) of the Securities Act [15 U.S.C.
§77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. §78u(d)(2)]; and
such other relief as the Court may deem appropriate.
10. The Commission also seeks relief against Daniel Solomita and
8198381 Canada, Inc. (together, the “Relief Defendants”), who received
proceeds of the Defendants’ unlawful acts, practices and schemes and should not
be entitled to retain those illegally-derived proceeds.
DEFENDANTS
11. David Stephens, age 66, is a Canadian citizen believed to be
residing in Vancouver, British Columbia.
12. Donald Linn Danks, age 65, is a resident of Newport Beach,
California and was a member of the Board of Directors of Loop from June 2015
to June 2018.
13. Jonathan Destler, age 58, is a resident of Los Angeles,
California.
14. Robert Lazerus, age 66, is a resident of Solana Beach, California.
RELIEF DEFENDANTS
15. Daniel Solomita, age 46, lives in Quebec, Canada and is the
President, Chief Executive Officer, and Director of Loop.
16. 8198381 Canada, Inc., is a Quebec, Canada corporation

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headquartered in Montreal, Quebec which is wholly owned by Solomita.
RELATED ENTITIES
17. Loop Industries, Inc., is a Nevada corporation headquartered in
Terrebonne, Quebec, Canada whose shares have traded on the Nasdaq Global
Market exchange since November 20, 2017 under the symbol LOOP.  Prior to
trading on NASDAQ, Loop stock traded on OTC Link, operated by OTC
Markets Group, Inc., from November 2015 to November 19, 2017 under the
symbol LLPP.  Loop describes itself as a plastics recycling company whose
proprietary technology focuses on recycling no- and low-value waste plastic and
polyester fiber into resin that is suitable for use in food-grade packaging and
polyester fiber.  Loop’s common stock (through its predecessor entities) has
been registered with the Commission pursuant to Section 12(g) of the Exchange
Act since 2012.
18. Touchstone Advisors, Inc., is a Nevada corporation incorporated
in 2008 and headquartered in Los Angeles, California.  Touchstone Advisors
purportedly serves as an advisory firm focused on assisting early stage
companies in all aspects of development, including helping move companies into
public markets and preparing companies for uplisting to major exchanges.
According to corporate filings, Touchstone Advisors is owned and operated by
Destler and a relative.  Danks and Destler are Managing Partners of Touchstone
Advisors and they jointly control at least one financial account.  Touchstone
Advisors is not registered with the Commission in any capacity.
19. Touchstone Holding Company, LLC is a limited liability
company formed in 2017 in California.  Destler and Touchstone Advisors are
both members of Touchstone Holding Company.
20. Ventanas Capital, LLC is a limited liability company formed in
2014 in Nevada.  Person B is the sole member of Ventanas, but Danks has
exerted control over one or more of its brokerage accounts.

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21. Vertical Leap Advisors LLC is a limited liability company
formed in 2010 in Nevada, jointly controlled by Destler and Danks.
BACKGROUND
22. Persons who control companies which have stock that is sold to
the public are subject to a variety of legal and regulatory requirements. Such
registration requirements, sale restrictions, and disclosure obligations are
safeguards designed to inform investors about the nature of the stock they are
holding or considering buying, and from whom they would be buying that stock.
23. Before selling stock, control persons are required to: (a) register
the stock sales with the Commission pursuant to Section 5 of the Securities Act
[15 U.S.C. § 77e]; (b) sell the stock pursuant to an applicable exemption from
registration; or (c) sell the stock pursuant to conditions set forth in SEC Rule 144
[17 C.F.R. § 240.144], including limitations on the amount of stock a control
person can legally sell.  Also, investors in certain public companies are required
publicly to disclose any ownership interest in excess of 5% of the company’s
publicly traded stock.
24.  “Restricted stock” includes stock of a company whose shares are
traded publicly (also known as an “issuer”) that has been acquired from an
issuer, or an affiliate of an issuer, in a private transaction that is not registered
with the Commission.  In addition, stock held by an issuer or affiliate of an
issuer is restricted stock.  Absent an exemption under the federal securities laws
and rules, restricted stock cannot legally be offered or sold to the public unless a
securities registration statement has been filed with the Commission (for an
offer) or is in effect (for a sale).  A registration statement contains important
information about an issuer’s business operations, financial condition, results of
operations, risk factors, and management.  It also includes disclosure of any
person or group who is the beneficial owner of more than 5% of the company’s
securities.

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25. An “affiliate” of an issuer is a person or entity that, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such issuer.  “Control” means the power to direct
management and policies of the company in question.  Affiliates include
officers, directors and controlling shareholders, as well as any person who is
under “common control” with or has common control of an issuer.  As used
herein, the term “control group” means a group that collectively is an “affiliate”
of an issuer.
26. “Unrestricted stock” is stock that may legally be offered and sold
in the public securities marketplace by a non-affiliate, ordinarily after having
previously been subject to a registration statement.  Registration statements are
transaction specific, however, and apply to each separate offer and sale as
detailed in the registration statement.  Registration, therefore, does not attach to
the security itself, and registration at one stage for one party does not necessarily
suffice to register subsequent offers and sales by the same or different parties.
Thus, when a control person buys publicly-traded or otherwise unrestricted
shares in a company s/he controls, those shares automatically become subject to
the legal restrictions on sales by an affiliate, which strictly limit the quantity of
shares that may be sold in the public markets absent registration.  Without
registration, affiliates are prohibited from selling large quantities of an issuer’s
shares, regardless of how the affiliates obtained those shares.
27. A “transfer agent” is a company that, among other things, issues
and cancels certificates of a company’s stock to reflect changes in ownership.
Many companies that have publicly traded securities use transfer agents to keep
track of the individuals and entities that own their stock.  Transfer agents
routinely keep track of whether shares are restricted from resale.
28. A “shell company” is a legal entity that lacks meaningful assets or
business operations. In a scheme to profit from such companies without actually

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commencing business operations, individuals sometimes file materially false
registration statements and other filings to make company shares appear to be
eligible for public trading and quotation. Such “clean” shells, as they are called,
may be sold for substantial sums.
29. OTC (Over-the-Counter) Markets Group, Inc. is a stock quotation
service that facilitates public trading of shares in public companies that are not
otherwise listed on national securities exchanges (like NASDAQ or the New
York Stock Exchange).
30. “Penny Stock,” as used herein, generally refers to a security issued
by a very small company that trades at less than $5 per share.
FACTUAL ALLEGATIONS
A. The Fraudulent Scheme by Stephens, Danks, and Destler to Conceal
Control of Loop While Selling Loop Stock
1. Stephens gained control of all the unrestricted shares of Loop
stock while concealing his ownership.
31. Stephens, Danks, and Destler engaged in a series of actions in
approximately 2014 and 2015 designed to provide Stephens with control of all
the unrestricted shares of Loop stock while concealing his ownership.
32. The Defendants’ scheme was facilitated by individuals whose
business involved facilitating securities fraud schemes, including by creating
public shell companies that can be acquired by individuals or groups seeking to
hide their beneficial ownership and control of a company.
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33. Prior to the Defendants’ involvement in the fraud, a publicly
traded shell company named First American Group, Inc. (“First American”) was
created. Through a series of transactions between 2012 and 2013, all of the

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 Most of these entities or the persons controlling them have been previously charged by the
Commission for facilitating illegal penny stock securities sales.  See SEC v. Bajic, et al., No. 20-cv-
007 (S.D.N.Y. filed Jan. 2020); SEC v. Sharp et al., No. 21-cv-11276 (D. Mass. filed August 2021).

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unrestricted shares of First American were transferred into eleven different
offshore nominee entities.  Each of these nominee entities appeared to be
administered by a different owner, but in fact they were all under common
control.
34.  In approximately 2014, Stephens acquired the First American
shell, covertly obtaining control of the eleven nominee entities.
35. Destler and Danks are long-time business associates.  On October
3, 2014, Destler, copying Danks, introduced Stephens to Relief Defendant
Daniel Solomita, at Loop Holdings, Inc., describing Stephens as a “close
contact” and the “principal representing a public shell candidate we are looking
to secure.”  The same day, Touchstone Advisors, Inc. (“Touchstone Advisors”)
(a Danks/Destler entity) entered into a consulting and advisory agreement with
Loop Holdings.  Thereafter, Stephens worked with Destler, Danks, and Solomita
to explore the possibility of merging his public shell company, First American,
with Loop Holdings.  Eight months later, in June 2015, First American
successfully completed a reverse merger with Loop Holdings.  In September
2015, the surviving public company changed its name to Loop Industries, Inc.
(“Loop”).  At that time, Loop was a penny stock trading on OTC Link.
36. As a result of the reverse merger, all of the purportedly
unrestricted shares of First American stock covertly held by Stephens became
purportedly unrestricted shares of Loop, and they collectively represented all of
the outstanding unrestricted shares of Loop.
37. Stephens, who had the authority to direct each of the eleven
nominee entities, thus controlled all of the approximately 6.5 million outstanding
unrestricted shares of Loop, which had become a publicly traded company
through the reverse merger.  But, by design, these shares all appeared to be
owned by unrelated entities that held less than five percent of the stock.  Each
entity thus appeared to avoid the threshold for reporting their beneficial

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ownership of Loop stock under the relevant provisions of the Exchange Act.
Further, this structure allowed the entities to avoid scrutiny by brokerage firms,
which often apply a higher level of scrutiny to stock ownership positions over
five percent of a public company.
38. As a result of these actions, Stephens was able to deliberately
conceal from transfer agents, broker-dealers, and other market participants the
fact that he was the beneficial owner and controlling shareholder of all of the
outstanding shares of the purportedly unrestricted Loop stock.
39. At the time of the reverse merger between Loop and First
American, in June 2015, Solomita became Chief Executive Officer and President
of Loop and Chairman of the Board of Directors.  At the same time, Danks
became a member of the Loop Board of Directors.  The Loop Board of Directors
consisted of only a small number of individuals, and it was a position of trust
and confidence.
40. Destler and a relative own Touchstone Advisors, and Danks is a
Managing Director of the company.  Destler and Touchstone Advisors are also
members of Touchstone Holding Company, LLC (“Touchstone Holding”).  In
addition, Danks and Destler jointly control another limited liability company,
Vertical Leap Advisors LLC (“Vertical Leap”).  At the time of the reverse
merger, the corporate address for Loop in Los Angeles, California was the same
corporate address listed for Touchstone Advisors, Vertical Leap, and other
companies connected to Destler and Danks.  Thus, by mid 2015: Stephens
covertly owned all of the unrestricted shares of Loop stock; Danks was a Loop
board member; and Destler was a business partner of Danks and a consultant to
Loop.
41.   After the reverse merger, Stephens transferred Loop stock to
Danks and Destler, and Stephens, Danks, and Destler worked together to
continue to conceal their ownership of the stock.

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42. Starting in late 2015, Stephens transferred some of the Loop stock
that he held through his nominee entities to Danks and Destler.  For example:
a) In or about November 2015, one of the Stephens-controlled
nominee entities transferred 225,000 Loop shares to
Vertical Leap, and 250,000 Loop shares to a trust for the
benefit of Danks’ family.
b) On or about November 3, 2015, a different Stephens-
controlled nominee entity transferred 700,000 Loop shares
to Touchstone Advisors.
c) On or about November 5, 2015, another Stephens-
controlled nominee entity transferred 100,000 Loop shares
to Touchstone Advisors and 350,000 Loop shares to
Vertical Leap.
d) On or about February 16, 2016, another Stephens-controlled
nominee entity transferred 500,000 purportedly unrestricted
Loop shares to Danks and 50,000 shares to Lazerus.
43. The manner in which these initial transfers were made—to
multiple entities and often with little to no compensation—demonstrates that,
after the merger, Stephens, Danks, and Destler were working together in a
coordinated manner for the common purpose of hiding the ownership of large
amounts of Loop stock.
44. Stephens, Danks, and Destler, as a control group working
together, were affiliates of Loop and exercised control over the company.  They
each knew or were reckless in not knowing that, as a result, they were subject to
certain disclosure, registration, and reporting requirements under the Securities
Act and the Exchange Act.  They also knew or were reckless in not knowing that
if the extent of their ownership and control of Loop stock was known by market
participants, their sales would be subject to additional scrutiny, which might

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adversely affect the price of the stock and potentially impact their ability to sell
the stock into the market.
45. Stephens, Danks, and Destler thus engaged in a scheme,
knowingly, recklessly, and/or negligently, to avoid those requirements, and to
hide their control of the company from investors, securities market
intermediaries, and securities regulators, and profit from the scheme by covertly
selling Loop stock.
46. Stephens continued to make transfers of Loop shares, both
personally and through nominee entities, to entities controlled by Danks and
Destler, until at least October 2017.
2. Danks and Lazerus engaged in market manipulation and took
advantage of an elderly investor to increase the price of Loop
stock in furtherance of the fraud.
47. Lazerus provided assistance to Danks and Destler in finding
investors for Danks’ and Destler’s shared business ventures, including Loop.  In
return for his services, Lazerus received a commission for sales of stock made to
investors he solicited in the form of either cash payment or shares of stock.
Lazerus found investors to buy Loop’s stock in the public markets and in private
sales/and or issuances.  These investors included an elderly investor (“Elderly
Investor”) who invested over $7 million in Loop by the end of the Relevant
Period.
48. Lazerus had a relationship of confidence with, and exerted
significant influence over, the Elderly Investor from 2015 to 2019.  Stephens,
Danks, and Destler repeatedly took advantage of that relationship to further their
fraudulent scheme.
49. During 2017 (and at times during subsequent periods), Danks and
Lazerus engaged in a concerted effort to time the purchases made by the Elderly
Investor as a means of supporting Loop’s share price.  This activity benefited

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Loop not only by raising its stock price generally, but also by supporting its
application to move trading of the stock from trading on the OTC Markets to
trading on the NASDAQ exchange, a move (or “up-list”) that itself had a
beneficial impact on the value of Loop’s stock.
50. Specifically, on 26 trading days between March and December
2017, the Elderly Investor’s purchases were greater than 50% of the market
volume for Loop’s shares.  The Elderly Investor’s actions played a significant
role in raising the value of Loop’s stock.  The chart below illustrates the volume
of purchases by the Elderly Investor and the impact on Loop stock price in 2017.

51. Danks communicated directly with Lazerus to ask him to
encourage the Elderly Investor to purchase stock on specific days.  Danks did
this for the purpose of raising the stock price of Loop, so that he and his

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associates, Destler and Stephens, could then sell the stock for a higher profit, and
in order to support the uplisting of the stock.  Lazerus was aware that this was
Danks’ intention, and he encouraged the Elderly Investor to make the purchases
to achieve this goal.
52. For example, on November 1 and 2, 2017, as the stock was being
actively evaluated for uplisting to the NASDAQ exchange Danks sent a series of
messages to Lazerus trying to encourage him to get the Elderly Investor to buy
stock:
 Date Communication
 11/1/2017   “Robert, Can u get [Elderly Investor] to buy 4-5k shares a
day for next week or so?  Thx.  Call u around noon with
some updates”
11/2/2017    “Any luck with [Elderly Investor] in the market...We need
the stock to firm up at about $13-$14”
11/2/2017    “???We’re negotiating with lender and need price up to set
warrant prices.  Let me know if [Elderly Investor] can
help...”

53. While the Elderly Investor was purchasing shares, Stephens,
Danks, Destler, and/or Lazerus were often selling Loop shares.  Between April
and November 2017, on 112 of the 166 trading days, the Elderly Investor bought
Loop stock on the same day that Stephens, Danks, Destler or Lazerus sold Loop
in their respective accounts.  During that period, the Elderly Investor purchased
$3.2 million worth of Loop stock in the open market.  During the same time
period, he spent $1.8 million purchasing Loop stock in private transactions with
Danks, Destler, and Lazerus.
54. Danks and Destler, through entities they controlled, compensated

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Lazerus for the Elderly Investor’s securities transactions either with a
commission paid in cash or in Loop stock.
3. Stephens, Danks, and Destler sold Loop Stock into the Public
Markets while concealing their ownership.
55. In addition to the sales they made directly to the Elderly Investor
and others in private transactions, Stephens, Danks, and Destler sold Loop stock
in the public markets using a network of entities owned and controlled by
Stephens, Danks, and Destler.
56. Stephens, Danks, and Destler knew or were reckless in not
knowing about the disclosure, registration, and reporting requirements that are
triggered under the federal securities laws for sales by individuals or entities that
are affiliates of a public company.  They also knew or were reckless in not
knowing about the increased scrutiny from brokerage firms for owners of over
five percent of a company’s stock.  Moreover, they knew or were reckless in not
knowing that beneficial owners of more than five percent of any class of equity
securities must file ownership reports with the SEC.  In order to evade these
requirements, Stephens, Danks, and Destler worked together to hide the true
beneficial ownership of the Loop stock they collectively controlled.  They did
this in part by transferring and selling stock between the entities that they
controlled, often for little to no compensation.  Thus, when they sold the stock of
Loop, the purchasers were not aware that they were buying shares from
individuals that, collectively, controlled Loop.
57. For instance, Stephens had an ongoing business relationship with
Associate A, who was one of the people who provided Stephens with some of
the 11 nominee entities Stephens used from the outset of his scheme to conceal
the ownership of his unrestricted Loop stock.  Stephens directed Associate A to
sell some of his Loop shares into the United States public market using nominee
entities Associate A controlled.  Between October 2017 and February 2018,

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Associate A used a Singaporean brokerage account to sell Stephens’ Loop shares
for proceeds of $1,684,000.  Associate A then wired about 95% of those
proceeds to Stephens’ bank account and kept the balance of the proceeds.  In
another instance, Stephens acquired multiple blocks of Loop shares from four of
the eleven nominee companies, for no apparent consideration, into his own
name, and then transferred the stock into the name of a nominee company that
Associate A controlled.  Using a Hong Kong brokerage account, Associate A
then sold that stock into the United States market on Stephens’ behalf between
June and August 2017, generating proceeds of about $1.1 million.  Associate A
then retained a 4% commission and remitted the net proceeds to Stephens’
personal bank account.
58. In another example of deceptive conduct, in the fall of 2017,
Stephens transferred 122,650 shares of Loop stock he had previously acquired in
his own name from three of the original eleven nominee entities he controlled to
Touchstone Advisors, which was controlled by Destler and Danks.  Several days
later, Touchstone Advisors, brokered by Lazerus, sold all of those shares to the
Elderly Investor for $1,410,475.  Touchstone Advisors then wired $1,318,487 of
the sale proceeds to Stephens, keeping $91,988 in profit.  A third of that profit
was paid to a trust for the benefit of the Danks family, and a third of the profit
was paid to Lazerus, in exchange for brokering the sale with the remaining third
left in the Touchstone bank account which was controlled, in part, by Destler.
The entire transaction was designed so that Stephens, Danks, and Destler, aided
by Lazerus, could sell Loop stock to the Elderly Investor without him knowing
that the stock he was buying was being sold by individuals who collectively
controlled the company.
59. Another entity used by the group to hide their ownership and
control of Loop stock was Ventanas Capital LLC (“Ventanas”).  The nominal
owner of Ventanas, Person B, maintained a long-time friendship and close

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association with Danks.  Danks exercised control over Ventanas’ brokerage
account both directly and indirectly, through his relationship with Person B.
60. For example, Ventanas began acquiring Loop shares in October
2015, both directly from the Stephens-controlled nominee entities and from
Vertical Leap, which was owned by Danks and Destler.  In 2016, Ventanas
received Loop shares from Touchstone Advisors, Vertical Leap, and a trust for
the benefit of the Danks family.  For each acquisition, there is either no evidence
that Ventanas paid for the shares it received, or there is evidence that Ventanas’
purchase price was significantly below the market value of Loop stock at the
time of the transaction.  Ventanas’ sales provided Danks with a way to sell those
securities that would conceal his effective ownership and control of them.
B. Danks and Destler Made Material Misrepresentations in
Furtherance of the Fraud.
61. Danks and Destler each made materially false statements to
brokerage firms in furtherance of the fraudulent scheme when they either
opened, or obtained authority to trade in, accounts through which they sold Loop
shares.
62. Specifically, in May 2017, Person B granted authority to Danks to
serve as a Limited Power of Attorney (“LPOA”) over Ventanas’ account, giving
Danks trading authority over its brokerage account.  When Danks was added as a
LPOA over Ventanas’ brokerage account, Danks falsely represented to the
brokerage firm in the application that he was not a director of a publicly held
company, when he was in fact a member of Loop’s board of directors.  At the
time Danks made this statement, he knew it was false, because he was on the
board of directors of Loop.   At that time, Loop was the only stock held by the
Ventanas account.
63. This false statement to the brokerage firm that he was not a
director was material because the brokerage firm would reasonably evaluate the

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fact that Danks was on Loop’s board of directors in determining whether to
accept the deposit of Loop shares and whether to allow Danks to trade in Loop
shares without additional scrutiny.
64. Destler also made materially false statements in furtherance of the
fraudulent scheme.  Specifically, in July 2015, just after Loop’s reverse merger,
when Danks became a board member of Loop, Destler opened two brokerage
accounts at a brokerage firm – one in the name of Vertical Leap (on which he
listed Danks and himself as members) and a second in the name of Touchstone
Advisors (on which Destler omitted Danks’ name).  In December 2015, Destler
deposited 150,000 shares of Loop into the Touchstone Advisors account.  These
shares were transferred from a Stephens-controlled nominee entity.  Touchstone
Advisors previously acquired these purportedly unrestricted shares from one of
the Stephens nominee entities for $0.008/share.  In connection with this deposit,
Destler made multiple misrepresentations to the brokerage firm including:
a) Destler misreported the total number of Loop shares
Touchstone Advisors owned at the time of the deposit.
Destler stated that Touchstone owned 1,300,000 Loop
shares (4.4% of Loop’s outstanding stock) when it actually
owned 1,800,000 shares (6.1% of Loop’s outstanding
stock).  This misrepresentation allowed Destler to appear to
avoid the reporting requirements for an owner of 5% or
more of the outstanding stock.
b) Destler answered “No” to the question of whether “[a]t the
time of Customer’s acquisition, was the Transferor an
‘affiliate’ of the Issuer or had the Transferor been an
‘affiliate’ at any time during the preceding 90 days.”  The
Transferor in this instance was Stephens through a nominee
entity.  Destler knew that this statement was false, because

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Stephens (as part of a group with both Danks and Destler
himself), was an affiliate of Loop by virtue of the group’s
ownership and control of Loop.
c) Destler made a statement to the brokerage firm concerning
the nominee entity not being an affiliate of Loop by
supplying a letter purportedly signed by the nominee entity
in which that entity falsely disclaimed affiliate status.
65. Destler signed a certification under the pains and penalty of
perjury confirming that all the information he provided “is and will be accurate
and complete.”  In fact, Destler knew that each of these statements was
inaccurate and/or incomplete, or was at least reckless with respect to the falsity
of these statements.  The statements and omissions were material because the
brokerage firm would reasonably evaluate that information in determining
whether to accept the deposit of Loop shares and whether to allow Destler to
trade in Loop shares without additional scrutiny.
C. Lazerus Acted as an Unregistered Broker-Dealer
66. During the course of the scheme, Lazerus acted as an unregistered
broker.  He regularly sold Loop securities to the Elderly Investor and other
investors for transaction-based compensation based on a percentage of the sale
proceeds or in exchange for Loop stock, as described in paragraphs 47-54 herein.
He also advised the Elderly Investor and other investors concerning the merits of
their Loop investments, and spent significant effort to solicit and recruit
investors to buy Loop stock at the request of Danks and Destler.  Some of the
Elderly Investor’s Loop securities were even delivered to Lazerus for the benefit
of the Elderly Investor, and were accompanied with correspondence that
described Lazerus as the Elderly Investor’s “financial advisor.”  Lazerus also
sold securities of additional issuers associated with Danks and Destler to the
Elderly Investor and other investors.

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67. Lazerus was not registered as a broker-dealer at the time of this
activity.
D. The Defendants and Relief Defendants Profited from the Scheme.
68. As a result of their fraudulent and deceptive conduct, Stephens,
Danks, and Destler were able to engage in manipulative activity and sell Loop
stock without disclosing their ownership and control of the company.
69. Stephens fraudulently sold Loop’s purportedly unrestricted stock
in public market sales through the nominee entities, and in private sales to the
Elderly Investor, which were brokered through Lazerus and Touchstone
Advisors.  In order to further obfuscate his identity, in some instances Stephens
directed that the profits from his Loop stock sales be directed to pay third parties
for services for the benefit of Stephens’ family.  In total, Stephens made
approximately $4.7 million in profits by selling Loop stock while hiding his
control of the company.
70. Danks and Destler also made significant profits by surreptitiously
selling Loop stock.  Lazerus made approximately $30,000 in commissions by
assisting Stephens, Danks, and Destler in the fraudulent sale of Loop stock.
Lazerus also received Loop stock from Stephens, Danks, and Destler as
compensation for assisting them in their fraudulent scheme.  For instance, on
July 27, 2017, Lazerus was given 1,457 shares of Loop common stock as
compensation for facilitating shares of Loop to the Elderly Investor.
71. As described above, Solomita became the CEO and President of
Loop and Chairman of the Board of Directors at the time of the reverse merger,
in 2015.  On or about October 20, 2015, after Ventanas acquired unrestricted
Loop stock from Stephens’ nominee entities, Danks helped arrange the sale of
400,000 of Ventanas’ shares to a Quebec Company, Company A.  Company A
paid Ventanas $437,490 for the shares on October 20, 2015.  Two days later,
Ventanas wired $413,875 (representing 95% of the proceeds) to 8198381

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Canada, Inc., Solomita’s company.
72. While emails between Danks and Solomita characterize the above
payment as a “loan,” there is no evidence that this purported loan was ever
memorialized in writing or repaid.  There is also no evidence that Loop or
Solomita earned the funds and thus has a legitimate claim.  The payment
represents proceeds from the fraudulent scheme – a transfer of Ventanas’ assets
from Danks to Solomita in a manner designed by the Defendants to hide the
origin of the funds.

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FIRST CLAIM FOR RELIEF
Fraud in the Offer or Sale of Securities
Violations of Sections 17(a)(1) and (3) of the Securities Act
(against Defendants Stephens, Danks, Destler, and Lazerus)

73. The SEC realleges and incorporates by reference paragraphs 1
through 72 above.
74. By reason of the conduct described above, Defendants Stephens,
Danks, Destler, and Lazerus, in connection with the offer or sale of securities, by
the use of the means or instrumentalities of interstate commerce or of the mails,
directly or indirectly, acting intentionally, knowingly, recklessly or negligently
(i) employed devices, schemes, or artifices to defraud; and (ii) engaged in
transactions, practices, or courses of business which operated or would operate
as a fraud or deceit upon any persons, including purchasers or sellers of the
securities.
75. Defendants Stephens, Danks, Destler, and Lazerus, with scienter,
employed devices, schemes and artifices to defraud; and with scienter or
negligence, engaged in transactions, practices, or courses of business which
operated or would operate as a fraud or deceit upon the purchaser.
76. By reason of the conduct described above, Defendants Stephens,
Danks, Destler, and Lazerus violated Securities Act Sections 17(a)(1) and (3) [15
U.S.C. §77q(a)(1) and (3)].

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SECOND CLAIM FOR RELIEF
Fraud in Connection with the Purchase and Sale of Securities
Violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c)
(against Defendants Stephens, Danks, Destler, and Lazerus)

77. The SEC realleges and incorporates by reference paragraphs 1
through 72 above.
78. By reason of the conduct described above, Stephens, Danks,
Destler, and Lazerus, directly or indirectly, in connection with the purchase or
sale of securities, by the use of the means or instrumentalities of interstate
commerce or of the mails, or of any facility of any national securities exchange,
intentionally, knowingly or recklessly, (i) employed devices, schemes, or
artifices to defraud; and (ii) engaged in acts, practices, or courses of business
which operated or would operate as a fraud or deceit upon any persons,
including purchasers or sellers of the securities.
79. By reason of the conduct described above, defendants Stephens,
Danks, Destler, and Lazerus violated Exchange Act Section 10(b) [15 U.S.C.
§78j(b)] and Rules 10b-5(a) and (c) [17 C.F.R. §240.10b-5(a) and (c)]
thereunder.

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THIRD CLAIM FOR RELIEF
Misstatements
Violation of Section 10(b) of the Exchange act and Rule 10b-5(b)
(against Defendants Danks and Destler)
80. The SEC realleges and incorporates by reference paragraphs 1
through 72 above.
81. By reason of the conduct described above, Defendants Danks and
Destler, directly or indirectly, acting intentionally, knowingly or recklessly, in
connection with the purchase or sale of securities, by use of the means or
instrumentalities of interstate commerce or the facilities of a national securities
exchange or the mails, made untrue statements of material fact or omitted to
state material fact(s) necessary to make the statements made not misleading in
light of the circumstances under which they were made.
82. By reason of the conduct described above, Defendants Danks and
Destler violated, and unless enjoined will continue to violate, Section 10(b) of
the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R.
§240.10b-5(b)].

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FOURTH CLAIM FOR RELIEF
Violation of Section 15(a) of the Exchange Act
(against Defendant Lazerus)
83. The SEC realleges and incorporates by reference paragraphs 1
through 72 above.
84. Defendant Lazerus, by engaging in the conduct described above,
either directly or indirectly, made use of the mails or means or instrumentalities
of interstate commerce to effect transactions in, or to induce or attempt to induce
the purchase or sale of, securities, without being registered as a broker or dealer
in accordance with Section 15(b) of the Exchange Act [15 U.S.C. §78o(b)].
85. By reason of the conduct described above, Lazerus violated and,
unless enjoined, will continue to violate Section 15(a) of the Exchange Act [15
U.S.C. §78o(a)(1)].

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FIFTH CLAIM FOR RELIEF
OTHER EQUITABLE RELIEF INCLUDING UNJUST ENRICHMENT AND
CONSTRUCTIVE TRUST (against Relief Defendants)
86. The SEC realleges and incorporates by reference paragraphs 1
through 72 above.
87. Section 21(d)(5) of the Exchange Act [15 U.S.C. §78u(d)(5)]
states “In any action or proceeding brought or instituted by the Commission
under any provision of the securities laws, the Commission may seek, and any
Federal court may grant, any equitable relief that may be appropriate or
necessary for the benefit of investors.”
88. The Relief Defendants have received funds derived from the
unlawful acts, practices and scheme of the Defendants under circumstances
dictating that, in equity and good conscience, they should not be allowed to
retain such funds.
89. Further, specific property acquired or improved by the Relief
Defendants is traceable to Defendants’ wrongful acts, and there is no reason in
equity why the Relief Defendants should be entitled to retain that property.
90. As a result, the Relief Defendants are liable for unjust enrichment
and should be required to return their ill-gotten gains, in an amount to be
determined by the Court.  The Court should also impose a constructive trust on
property in the possession of the Relief Defendants that is traceable to the
Defendants’ wrongful acts.

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PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
Issue findings of fact and conclusions of law that Defendants committed the
alleged violations.
I.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Defendants Stephens, Danks, Destler, and
Lazerus, and their officers, agents, servants, employees and attorneys, and those
persons in active concert or participation with any of them, who receive actual notice
of the judgment by personal service or otherwise, and each of them, from violating
Section 17(a) of the Securities Act [15 U.S.C. §77q(a)], and Section 10(b) of the
Exchange Act [15 U.S.C. §§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-
5].
II.
Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Defendant Lazerus, and his officers, agents,
servants, employees and attorneys, and those persons in active concert or
participation with any of them, who receive actual notice of the judgment by personal
service or otherwise, and each of them, from violating Section 15(a) of the Exchange
Act.
III.
Order Defendants and Relief Defendants to disgorge all funds received from
their illegal conduct, together with prejudgment interest thereon, pursuant to Section
21(d)(7) of the Exchange Act [15 U.S.C. §78u(d)(7)].
IV.
Order Defendants to pay civil penalties pursuant to Section 20(d) of the
Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15
U.S.C. § 78u(d)(3)].

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V.
Enter an order barring Defendants from participating in any offering of a penny
stock, pursuant to Section 20(g) of the Securities Act [15 U.S.C. § 77t(g)] and Section
21(d) of the Exchange Act [15 U.S.C. § 78u(d)].
VI.
Enter an order barring Defendants Stephens, Danks and Destler from serving as
an officer or director of a public company pursuant to Section 20(e) of the Securities
Act [15 U.S.C. § 77t(e)] and 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)].
VII.
Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court.
VIII.
Grant such other and further relief as this Court may determine to be just and
necessary.

JURY DEMAND
The Commission demands a jury in this matter for all claims so triable.

Dated:   September 30, 2022

s/ Kathryn Wanner
KATHRYN WANNER
(CA Bar. No. 269310)
Local Counsel
Email: [email protected]
Securities and Exchange Commission
444 S. Flower St., Suite 900
Los Angeles, CA  90071
Telephone: (323) 965-3998Facsimile:
(213) 443-1904

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AMY HARMAN BURKART (Mass Bar
No. 651828)
KATHLEEN BURDETTE SHIELDS
(Mass Bar No.  637438)
WILLIAM J. DONAHUE (Mass Bar No.
631229)
ALICIA REED (NY Bar No. 4913596)
AMY GWIAZDA (Mass Bar No.
663494)
(617) 573-8904 (Shields Direct)
(617) 573-5905 (Burkart Direct)
Facsimile: (617) 573-4590

Attorneys for Plaintiff
Securities and Exchange Commission

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AMY HARMAN BURKART (Mass Bar No. 651828) 
Email:  [email protected] 
KATHLEEN BURDETTE SHIELDS (Mass Bar No.  637438) 
Email: [email protected] 
WILLIAM J. DONAHUE (Mass Bar No. 631229) 
Email:  [email protected] 
ALICIA REED (NY Bar No. 4913596) 
Email:  [email protected] 
AMY GWIAZDA (Mass Bar No. 663494) 
Email:  [email protected]  
Attorneys for Plaintiff 
Securities and Exchange Commission 
Boston Regional Office 
33 Arch St., 24th Floor 
Boston, MA 02110  
Telephone:  (617) 573-8900 
Facsimile:  (617) 573-4590 

Local Counsel 
KATHRYN WANNER (CA Bar. No. 269310) 
Email: [email protected] 
Securities and Exchange Commission 
444 S. Flower St., Suite 900 
Los Angeles, CA  90071 
Telephone:  (323) 965-3998 
Facsimile: (213) 443-1904 

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF CALIFORNIA 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 

vs. 

DAVID STEPHENS, DONALD LINN 
DANKS, JONATHAN DESTLER, and 
ROBERT LAZERUS, 

Defendants, and  

DANIEL SOLOMITA and 8198381 
Canada, Inc. 

Relief Defendants. 

Case No.   

COMPLAINT 

'22CV1483 DEBAJB

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Plaintiff Securities and Exchange Commission (“SEC”) alleges: 

JURISDICTION AND VENUE 

1. The Court has jurisdiction over this action pursuant to Sections 

20(b), 20(d) and 22(a) of the Securities Act of 1933 (“Securities Act”) [15 

U.S.C. §§ 77t(b), 77t(d)(1) & 77v(a)], and Sections 21(d), 21(e) and 27(a) of the 

Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d)(1), 

78u(d)(3)(A), 78u(e) & 78aa(a)]. 

2. David Stephens, Donald Linn Danks, Jonathan Destler, and 

Robert Lazerus (collectively the “Defendants”) have, directly or indirectly, made 

use of the means or instrumentalities of interstate commerce, of the mails, or of 

the facilities of a national securities exchange in connection with the 

transactions, acts, practices and courses of business alleged in this complaint.  

3. Venue is proper in this district pursuant to Section 22(a) of the 

Securities Act [15 U.S.C. § 77v(a)], and Section 27(a) of the Exchange Act [15 

U.S.C. § 78aa(a)], because certain of the transactions, acts, practices and courses 

of conduct constituting violations of the federal securities laws occurred within 

this district.  In addition, venue is proper in this district because Defendants 

Danks, Destler, and Lazerus reside in this district. 

SUMMARY 

4. This is a securities enforcement action.  From at least 2014 to at 

least November 2018 (the “Relevant Period”), Stephens, Danks, and Destler 

engaged in a deceptive scheme to sell publically traded stock in Loop Industries, 

Inc. (“Loop”), while concealing their ownership of the stock and connections 

with the company.  Lazerus worked with the group to further the scheme by 

helping to increase demand for Loop stock by promoting it and brokering sales 

to a number of investors, including to an elderly investor who invested millions 

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of dollars in Loop at the same time that the group was covertly selling the stock.     

5. In the course of the scheme, Stephens, Danks, Destler, and 

Lazerus all worked to further the fraud by engaging in deceptive conduct—

including by seeking to evade securities law disclosure, registration, and 

reporting requirements—to conceal their ownership of Loop stock.  Danks was a 

member of the Board of Directors of Loop, and Danks and Destler made specific 

material misrepresentations to brokerage firms to conceal Danks’ connections to 

the company.  In addition, Lazerus failed to meet the broker registration 

requirements of the securities laws by regularly selling Loop securities without 

registering with the Commission as a broker.   

6.   As a result of the Defendants’ deceptive scheme, investors 

buying Loop stock during the Relevant Period were deprived of important 

information: (1) that Stephens, Danks, and Destler were working as a 

coordinated group to hide their ownership and collective control of significant 

amounts of Loop stock; and (2) that members of the group, assisted by Lazerus, 

were encouraging others to buy Loop stock at the same time that they were 

surreptitiously selling it.    

7. Over the Relevant Period, working together, these Defendants 

generated millions of dollars in proceeds from fraudulently selling Loop stock.    

8. As a result of their conduct alleged herein, Stephens, Danks, 

Destler, and Lazerus violated Sections 17(a)(1) and 17(a)(3) of the Securities 

Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) 

thereunder;  Danks and Destler violated Section 10(b) of the Exchange Act and 

Rule 10b-5(b) thereunder; and Lazerus violated Section 15(a) of the Exchange 

Act.   

9. The Commission seeks a permanent injunction against the 

Defendants, enjoining them from engaging in transactions, acts, practices, and 

courses of business of the type alleged in this Complaint, disgorgement of all ill-

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gotten gains from the unlawful conduct set forth in this Complaint pursuant to 

Section 21(d)(7) of the Exchange Act [15 U.S.C. §78u(d)(7)], together with 

prejudgment interest, civil penalties pursuant to Section 20(d) of the Securities 

Act [15 U.S.C. §77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. 

§78u(d)(3)]; an order barring all Defendants from participating in any offering of 

a penny stock, pursuant to Section 20(g) of the Securities Act [15 U.S.C. 

§77t(g)] and/or Section 21(d) of the Exchange Act [15 U.S.C. §78u(d)]; an order 

barring Stephens, Danks, and Destler from serving as an officer or director of a 

public company pursuant to Section 20(e) of the Securities Act [15 U.S.C. 

§77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. §78u(d)(2)]; and 

such other relief as the Court may deem appropriate. 

10. The Commission also seeks relief against Daniel Solomita and 

8198381 Canada, Inc. (together, the “Relief Defendants”), who received 

proceeds of the Defendants’ unlawful acts, practices and schemes and should not 

be entitled to retain those illegally-derived proceeds.   

DEFENDANTS 

11. David Stephens, age 66, is a Canadian citizen believed to be 

residing in Vancouver, British Columbia.     

12. Donald Linn Danks, age 65, is a resident of Newport Beach, 

California and was a member of the Board of Directors of Loop from June 2015 

to June 2018.     

13. Jonathan Destler, age 58, is a resident of Los Angeles, 

California.   

14. Robert Lazerus, age 66, is a resident of Solana Beach, California. 

RELIEF DEFENDANTS 

15. Daniel Solomita, age 46, lives in Quebec, Canada and is the 

President, Chief Executive Officer, and Director of Loop. 

16. 8198381 Canada, Inc., is a Quebec, Canada corporation 

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headquartered in Montreal, Quebec which is wholly owned by Solomita.  

RELATED ENTITIES 

17. Loop Industries, Inc., is a Nevada corporation headquartered in 

Terrebonne, Quebec, Canada whose shares have traded on the Nasdaq Global 

Market exchange since November 20, 2017 under the symbol LOOP.  Prior to 

trading on NASDAQ, Loop stock traded on OTC Link, operated by OTC 

Markets Group, Inc., from November 2015 to November 19, 2017 under the 

symbol LLPP.  Loop describes itself as a plastics recycling company whose 

proprietary technology focuses on recycling no- and low-value waste plastic and 

polyester fiber into resin that is suitable for use in food-grade packaging and 

polyester fiber.  Loop’s common stock (through its predecessor entities) has 

been registered with the Commission pursuant to Section 12(g) of the Exchange 

Act since 2012. 

18. Touchstone Advisors, Inc., is a Nevada corporation incorporated 

in 2008 and headquartered in Los Angeles, California.  Touchstone Advisors 

purportedly serves as an advisory firm focused on assisting early stage 

companies in all aspects of development, including helping move companies into 

public markets and preparing companies for uplisting to major exchanges.  

According to corporate filings, Touchstone Advisors is owned and operated by 

Destler and a relative.  Danks and Destler are Managing Partners of Touchstone 

Advisors and they jointly control at least one financial account.  Touchstone 

Advisors is not registered with the Commission in any capacity.  

19. Touchstone Holding Company, LLC is a limited liability 

company formed in 2017 in California.  Destler and Touchstone Advisors are 

both members of Touchstone Holding Company. 

20. Ventanas Capital, LLC is a limited liability company formed in 

2014 in Nevada.  Person B is the sole member of Ventanas, but Danks has 

exerted control over one or more of its brokerage accounts.     

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21. Vertical Leap Advisors LLC is a limited liability company 

formed in 2010 in Nevada, jointly controlled by Destler and Danks.   

BACKGROUND 

22. Persons who control companies which have stock that is sold to 

the public are subject to a variety of legal and regulatory requirements. Such 

registration requirements, sale restrictions, and disclosure obligations are 

safeguards designed to inform investors about the nature of the stock they are 

holding or considering buying, and from whom they would be buying that stock.   

23. Before selling stock, control persons are required to: (a) register 

the stock sales with the Commission pursuant to Section 5 of the Securities Act 

[15 U.S.C. § 77e]; (b) sell the stock pursuant to an applicable exemption from 

registration; or (c) sell the stock pursuant to conditions set forth in SEC Rule 144 

[17 C.F.R. § 240.144], including limitations on the amount of stock a control 

person can legally sell.  Also, investors in certain public companies are required 

publicly to disclose any ownership interest in excess of 5% of the company’s 

publicly traded stock.   

24.  “Restricted stock” includes stock of a company whose shares are 

traded publicly (also known as an “issuer”) that has been acquired from an 

issuer, or an affiliate of an issuer, in a private transaction that is not registered 

with the Commission.  In addition, stock held by an issuer or affiliate of an 

issuer is restricted stock.  Absent an exemption under the federal securities laws 

and rules, restricted stock cannot legally be offered or sold to the public unless a 

securities registration statement has been filed with the Commission (for an 

offer) or is in effect (for a sale).  A registration statement contains important 

information about an issuer’s business operations, financial condition, results of 

operations, risk factors, and management.  It also includes disclosure of any 

person or group who is the beneficial owner of more than 5% of the company’s 

securities.   

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25. An “affiliate” of an issuer is a person or entity that, directly or 

indirectly through one or more intermediaries, controls, is controlled by, or is 

under common control with, such issuer.  “Control” means the power to direct 

management and policies of the company in question.  Affiliates include 

officers, directors and controlling shareholders, as well as any person who is 

under “common control” with or has common control of an issuer.  As used 

herein, the term “control group” means a group that collectively is an “affiliate” 

of an issuer.     

26. “Unrestricted stock” is stock that may legally be offered and sold 

in the public securities marketplace by a non-affiliate, ordinarily after having 

previously been subject to a registration statement.  Registration statements are 

transaction specific, however, and apply to each separate offer and sale as 

detailed in the registration statement.  Registration, therefore, does not attach to 

the security itself, and registration at one stage for one party does not necessarily 

suffice to register subsequent offers and sales by the same or different parties.  

Thus, when a control person buys publicly-traded or otherwise unrestricted 

shares in a company s/he controls, those shares automatically become subject to 

the legal restrictions on sales by an affiliate, which strictly limit the quantity of 

shares that may be sold in the public markets absent registration.  Without 

registration, affiliates are prohibited from selling large quantities of an issuer’s 

shares, regardless of how the affiliates obtained those shares.   

27. A “transfer agent” is a company that, among other things, issues 

and cancels certificates of a company’s stock to reflect changes in ownership.  

Many companies that have publicly traded securities use transfer agents to keep 

track of the individuals and entities that own their stock.  Transfer agents 

routinely keep track of whether shares are restricted from resale. 

28. A “shell company” is a legal entity that lacks meaningful assets or 

business operations. In a scheme to profit from such companies without actually 

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commencing business operations, individuals sometimes file materially false 

registration statements and other filings to make company shares appear to be 

eligible for public trading and quotation. Such “clean” shells, as they are called, 

may be sold for substantial sums. 

29. OTC (Over-the-Counter) Markets Group, Inc. is a stock quotation 

service that facilitates public trading of shares in public companies that are not 

otherwise listed on national securities exchanges (like NASDAQ or the New 

York Stock Exchange).  

30. “Penny Stock,” as used herein, generally refers to a security issued 

by a very small company that trades at less than $5 per share.  

FACTUAL ALLEGATIONS 

A. The Fraudulent Scheme by Stephens, Danks, and Destler to Conceal 

Control of Loop While Selling Loop Stock  

1. Stephens gained control of all the unrestricted shares of Loop 

stock while concealing his ownership. 

31. Stephens, Danks, and Destler engaged in a series of actions in 

approximately 2014 and 2015 designed to provide Stephens with control of all 

the unrestricted shares of Loop stock while concealing his ownership.   

32. The Defendants’ scheme was facilitated by individuals whose 

business involved facilitating securities fraud schemes, including by creating 

public shell companies that can be acquired by individuals or groups seeking to 

hide their beneficial ownership and control of a company.1    

33. Prior to the Defendants’ involvement in the fraud, a publicly 

traded shell company named First American Group, Inc. (“First American”) was 

created. Through a series of transactions between 2012 and 2013, all of the 

                                           
1 Most of these entities or the persons controlling them have been previously charged by the 
Commission for facilitating illegal penny stock securities sales.  See SEC v. Bajic, et al., No. 20-cv-
007 (S.D.N.Y. filed Jan. 2020); SEC v. Sharp et al., No. 21-cv-11276 (D. Mass. filed August 2021).    

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unrestricted shares of First American were transferred into eleven different 

offshore nominee entities.  Each of these nominee entities appeared to be 

administered by a different owner, but in fact they were all under common 

control.     

34.  In approximately 2014, Stephens acquired the First American 

shell, covertly obtaining control of the eleven nominee entities.   

35. Destler and Danks are long-time business associates.  On October 

3, 2014, Destler, copying Danks, introduced Stephens to Relief Defendant 

Daniel Solomita, at Loop Holdings, Inc., describing Stephens as a “close 

contact” and the “principal representing a public shell candidate we are looking 

to secure.”  The same day, Touchstone Advisors, Inc. (“Touchstone Advisors”) 

(a Danks/Destler entity) entered into a consulting and advisory agreement with 

Loop Holdings.  Thereafter, Stephens worked with Destler, Danks, and Solomita 

to explore the possibility of merging his public shell company, First American, 

with Loop Holdings.  Eight months later, in June 2015, First American 

successfully completed a reverse merger with Loop Holdings.  In September 

2015, the surviving public company changed its name to Loop Industries, Inc. 

(“Loop”).  At that time, Loop was a penny stock trading on OTC Link.       

36. As a result of the reverse merger, all of the purportedly 

unrestricted shares of First American stock covertly held by Stephens became 

purportedly unrestricted shares of Loop, and they collectively represented all of 

the outstanding unrestricted shares of Loop.   

37. Stephens, who had the authority to direct each of the eleven 

nominee entities, thus controlled all of the approximately 6.5 million outstanding 

unrestricted shares of Loop, which had become a publicly traded company 

through the reverse merger.  But, by design, these shares all appeared to be 

owned by unrelated entities that held less than five percent of the stock.  Each 

entity thus appeared to avoid the threshold for reporting their beneficial 

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ownership of Loop stock under the relevant provisions of the Exchange Act.  

Further, this structure allowed the entities to avoid scrutiny by brokerage firms, 

which often apply a higher level of scrutiny to stock ownership positions over 

five percent of a public company.         

38. As a result of these actions, Stephens was able to deliberately 

conceal from transfer agents, broker-dealers, and other market participants the 

fact that he was the beneficial owner and controlling shareholder of all of the 

outstanding shares of the purportedly unrestricted Loop stock.   

39. At the time of the reverse merger between Loop and First 

American, in June 2015, Solomita became Chief Executive Officer and President 

of Loop and Chairman of the Board of Directors.  At the same time, Danks 

became a member of the Loop Board of Directors.  The Loop Board of Directors 

consisted of only a small number of individuals, and it was a position of trust 

and confidence.   

40. Destler and a relative own Touchstone Advisors, and Danks is a 

Managing Director of the company.  Destler and Touchstone Advisors are also 

members of Touchstone Holding Company, LLC (“Touchstone Holding”).  In 

addition, Danks and Destler jointly control another limited liability company, 

Vertical Leap Advisors LLC (“Vertical Leap”).  At the time of the reverse 

merger, the corporate address for Loop in Los Angeles, California was the same 

corporate address listed for Touchstone Advisors, Vertical Leap, and other 

companies connected to Destler and Danks.  Thus, by mid 2015: Stephens 

covertly owned all of the unrestricted shares of Loop stock; Danks was a Loop 

board member; and Destler was a business partner of Danks and a consultant to 

Loop.   

41.   After the reverse merger, Stephens transferred Loop stock to 

Danks and Destler, and Stephens, Danks, and Destler worked together to 

continue to conceal their ownership of the stock.   

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42. Starting in late 2015, Stephens transferred some of the Loop stock 

that he held through his nominee entities to Danks and Destler.  For example:   

a) In or about November 2015, one of the Stephens-controlled 

nominee entities transferred 225,000 Loop shares to 

Vertical Leap, and 250,000 Loop shares to a trust for the 

benefit of Danks’ family.   

b) On or about November 3, 2015, a different Stephens-

controlled nominee entity transferred 700,000 Loop shares 

to Touchstone Advisors.   

c) On or about November 5, 2015, another Stephens-

controlled nominee entity transferred 100,000 Loop shares 

to Touchstone Advisors and 350,000 Loop shares to 

Vertical Leap.  

d) On or about February 16, 2016, another Stephens-controlled 

nominee entity transferred 500,000 purportedly unrestricted 

Loop shares to Danks and 50,000 shares to Lazerus.  

43. The manner in which these initial transfers were made—to 

multiple entities and often with little to no compensation—demonstrates that, 

after the merger, Stephens, Danks, and Destler were working together in a 

coordinated manner for the common purpose of hiding the ownership of large 

amounts of Loop stock.   

44. Stephens, Danks, and Destler, as a control group working 

together, were affiliates of Loop and exercised control over the company.  They 

each knew or were reckless in not knowing that, as a result, they were subject to 

certain disclosure, registration, and reporting requirements under the Securities 

Act and the Exchange Act.  They also knew or were reckless in not knowing that 

if the extent of their ownership and control of Loop stock was known by market 

participants, their sales would be subject to additional scrutiny, which might 

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adversely affect the price of the stock and potentially impact their ability to sell 

the stock into the market.     

45. Stephens, Danks, and Destler thus engaged in a scheme, 

knowingly, recklessly, and/or negligently, to avoid those requirements, and to 

hide their control of the company from investors, securities market 

intermediaries, and securities regulators, and profit from the scheme by covertly 

selling Loop stock.     

46. Stephens continued to make transfers of Loop shares, both 

personally and through nominee entities, to entities controlled by Danks and 

Destler, until at least October 2017.   

2. Danks and Lazerus engaged in market manipulation and took 

advantage of an elderly investor to increase the price of Loop 

stock in furtherance of the fraud.  

47. Lazerus provided assistance to Danks and Destler in finding 

investors for Danks’ and Destler’s shared business ventures, including Loop.  In 

return for his services, Lazerus received a commission for sales of stock made to 

investors he solicited in the form of either cash payment or shares of stock.  

Lazerus found investors to buy Loop’s stock in the public markets and in private 

sales/and or issuances.  These investors included an elderly investor (“Elderly 

Investor”) who invested over $7 million in Loop by the end of the Relevant 

Period.   

48. Lazerus had a relationship of confidence with, and exerted 

significant influence over, the Elderly Investor from 2015 to 2019.  Stephens, 

Danks, and Destler repeatedly took advantage of that relationship to further their 

fraudulent scheme.     

49. During 2017 (and at times during subsequent periods), Danks and 

Lazerus engaged in a concerted effort to time the purchases made by the Elderly 

Investor as a means of supporting Loop’s share price.  This activity benefited 

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Loop not only by raising its stock price generally, but also by supporting its 

application to move trading of the stock from trading on the OTC Markets to 

trading on the NASDAQ exchange, a move (or “up-list”) that itself had a 

beneficial impact on the value of Loop’s stock.   

50. Specifically, on 26 trading days between March and December 

2017, the Elderly Investor’s purchases were greater than 50% of the market 

volume for Loop’s shares.  The Elderly Investor’s actions played a significant 

role in raising the value of Loop’s stock.  The chart below illustrates the volume 

of purchases by the Elderly Investor and the impact on Loop stock price in 2017. 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51. Danks communicated directly with Lazerus to ask him to 

encourage the Elderly Investor to purchase stock on specific days.  Danks did 

this for the purpose of raising the stock price of Loop, so that he and his 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

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associates, Destler and Stephens, could then sell the stock for a higher profit, and 

in order to support the uplisting of the stock.  Lazerus was aware that this was 

Danks’ intention, and he encouraged the Elderly Investor to make the purchases 

to achieve this goal. 

52. For example, on November 1 and 2, 2017, as the stock was being 

actively evaluated for uplisting to the NASDAQ exchange Danks sent a series of 

messages to Lazerus trying to encourage him to get the Elderly Investor to buy 

stock: 

 Date Communication  

 11/1/2017 “Robert, Can u get [Elderly Investor] to buy 4-5k shares a 

day for next week or so?  Thx.  Call u around noon with 

some updates” 

11/2/2017 “Any luck with [Elderly Investor] in the market…We need 

the stock to firm up at about $13-$14” 

11/2/2017 “???We’re negotiating with lender and need price up to set 

warrant prices.  Let me know if [Elderly Investor] can 

help…” 

 

53. While the Elderly Investor was purchasing shares, Stephens, 

Danks, Destler, and/or Lazerus were often selling Loop shares.  Between April 

and November 2017, on 112 of the 166 trading days, the Elderly Investor bought 

Loop stock on the same day that Stephens, Danks, Destler or Lazerus sold Loop 

in their respective accounts.  During that period, the Elderly Investor purchased 

$3.2 million worth of Loop stock in the open market.  During the same time 

period, he spent $1.8 million purchasing Loop stock in private transactions with 

Danks, Destler, and Lazerus.   

54. Danks and Destler, through entities they controlled, compensated 

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Lazerus for the Elderly Investor’s securities transactions either with a 

commission paid in cash or in Loop stock. 

3. Stephens, Danks, and Destler sold Loop Stock into the Public 

Markets while concealing their ownership.   

55. In addition to the sales they made directly to the Elderly Investor 

and others in private transactions, Stephens, Danks, and Destler sold Loop stock 

in the public markets using a network of entities owned and controlled by 

Stephens, Danks, and Destler. 

56. Stephens, Danks, and Destler knew or were reckless in not 

knowing about the disclosure, registration, and reporting requirements that are 

triggered under the federal securities laws for sales by individuals or entities that 

are affiliates of a public company.  They also knew or were reckless in not 

knowing about the increased scrutiny from brokerage firms for owners of over 

five percent of a company’s stock.  Moreover, they knew or were reckless in not 

knowing that beneficial owners of more than five percent of any class of equity 

securities must file ownership reports with the SEC.  In order to evade these 

requirements, Stephens, Danks, and Destler worked together to hide the true 

beneficial ownership of the Loop stock they collectively controlled.  They did 

this in part by transferring and selling stock between the entities that they 

controlled, often for little to no compensation.  Thus, when they sold the stock of 

Loop, the purchasers were not aware that they were buying shares from 

individuals that, collectively, controlled Loop. 

57. For instance, Stephens had an ongoing business relationship with 

Associate A, who was one of the people who provided Stephens with some of 

the 11 nominee entities Stephens used from the outset of his scheme to conceal 

the ownership of his unrestricted Loop stock.  Stephens directed Associate A to 

sell some of his Loop shares into the United States public market using nominee 

entities Associate A controlled.  Between October 2017 and February 2018, 

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Associate A used a Singaporean brokerage account to sell Stephens’ Loop shares 

for proceeds of $1,684,000.  Associate A then wired about 95% of those 

proceeds to Stephens’ bank account and kept the balance of the proceeds.  In 

another instance, Stephens acquired multiple blocks of Loop shares from four of 

the eleven nominee companies, for no apparent consideration, into his own 

name, and then transferred the stock into the name of a nominee company that 

Associate A controlled.  Using a Hong Kong brokerage account, Associate A 

then sold that stock into the United States market on Stephens’ behalf between 

June and August 2017, generating proceeds of about $1.1 million.  Associate A 

then retained a 4% commission and remitted the net proceeds to Stephens’ 

personal bank account. 

58. In another example of deceptive conduct, in the fall of 2017, 

Stephens transferred 122,650 shares of Loop stock he had previously acquired in 

his own name from three of the original eleven nominee entities he controlled to 

Touchstone Advisors, which was controlled by Destler and Danks.  Several days 

later, Touchstone Advisors, brokered by Lazerus, sold all of those shares to the 

Elderly Investor for $1,410,475.  Touchstone Advisors then wired $1,318,487 of 

the sale proceeds to Stephens, keeping $91,988 in profit.  A third of that profit 

was paid to a trust for the benefit of the Danks family, and a third of the profit 

was paid to Lazerus, in exchange for brokering the sale with the remaining third 

left in the Touchstone bank account which was controlled, in part, by Destler.  

The entire transaction was designed so that Stephens, Danks, and Destler, aided 

by Lazerus, could sell Loop stock to the Elderly Investor without him knowing 

that the stock he was buying was being sold by individuals who collectively 

controlled the company.   

59. Another entity used by the group to hide their ownership and 

control of Loop stock was Ventanas Capital LLC (“Ventanas”).  The nominal 

owner of Ventanas, Person B, maintained a long-time friendship and close 

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association with Danks.  Danks exercised control over Ventanas’ brokerage 

account both directly and indirectly, through his relationship with Person B.     

60. For example, Ventanas began acquiring Loop shares in October 

2015, both directly from the Stephens-controlled nominee entities and from 

Vertical Leap, which was owned by Danks and Destler.  In 2016, Ventanas 

received Loop shares from Touchstone Advisors, Vertical Leap, and a trust for 

the benefit of the Danks family.  For each acquisition, there is either no evidence 

that Ventanas paid for the shares it received, or there is evidence that Ventanas’ 

purchase price was significantly below the market value of Loop stock at the 

time of the transaction.  Ventanas’ sales provided Danks with a way to sell those 

securities that would conceal his effective ownership and control of them.   

B. Danks and Destler Made Material Misrepresentations in 

Furtherance of the Fraud. 

61. Danks and Destler each made materially false statements to 

brokerage firms in furtherance of the fraudulent scheme when they either 

opened, or obtained authority to trade in, accounts through which they sold Loop 

shares. 

62. Specifically, in May 2017, Person B granted authority to Danks to 

serve as a Limited Power of Attorney (“LPOA”) over Ventanas’ account, giving 

Danks trading authority over its brokerage account.  When Danks was added as a 

LPOA over Ventanas’ brokerage account, Danks falsely represented to the 

brokerage firm in the application that he was not a director of a publicly held 

company, when he was in fact a member of Loop’s board of directors.  At the 

time Danks made this statement, he knew it was false, because he was on the 

board of directors of Loop.   At that time, Loop was the only stock held by the 

Ventanas account.             

63. This false statement to the brokerage firm that he was not a 

director was material because the brokerage firm would reasonably evaluate the 

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fact that Danks was on Loop’s board of directors in determining whether to 

accept the deposit of Loop shares and whether to allow Danks to trade in Loop 

shares without additional scrutiny.   

64. Destler also made materially false statements in furtherance of the 

fraudulent scheme.  Specifically, in July 2015, just after Loop’s reverse merger, 

when Danks became a board member of Loop, Destler opened two brokerage 

accounts at a brokerage firm – one in the name of Vertical Leap (on which he 

listed Danks and himself as members) and a second in the name of Touchstone 

Advisors (on which Destler omitted Danks’ name).  In December 2015, Destler 

deposited 150,000 shares of Loop into the Touchstone Advisors account.  These 

shares were transferred from a Stephens-controlled nominee entity.  Touchstone 

Advisors previously acquired these purportedly unrestricted shares from one of 

the Stephens nominee entities for $0.008/share.  In connection with this deposit, 

Destler made multiple misrepresentations to the brokerage firm including: 

a) Destler misreported the total number of Loop shares 

Touchstone Advisors owned at the time of the deposit.  

Destler stated that Touchstone owned 1,300,000 Loop 

shares (4.4% of Loop’s outstanding stock) when it actually 

owned 1,800,000 shares (6.1% of Loop’s outstanding 

stock).  This misrepresentation allowed Destler to appear to 

avoid the reporting requirements for an owner of 5% or 

more of the outstanding stock.     

b) Destler answered “No” to the question of whether “[a]t the 

time of Customer’s acquisition, was the Transferor an 

‘affiliate’ of the Issuer or had the Transferor been an 

‘affiliate’ at any time during the preceding 90 days.”  The 

Transferor in this instance was Stephens through a nominee 

entity.  Destler knew that this statement was false, because 

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Stephens (as part of a group with both Danks and Destler 

himself), was an affiliate of Loop by virtue of the group’s 

ownership and control of Loop. 

c) Destler made a statement to the brokerage firm concerning 

the nominee entity not being an affiliate of Loop by 

supplying a letter purportedly signed by the nominee entity 

in which that entity falsely disclaimed affiliate status. 

65. Destler signed a certification under the pains and penalty of 

perjury confirming that all the information he provided “is and will be accurate 

and complete.”  In fact, Destler knew that each of these statements was 

inaccurate and/or incomplete, or was at least reckless with respect to the falsity 

of these statements.  The statements and omissions were material because the 

brokerage firm would reasonably evaluate that information in determining 

whether to accept the deposit of Loop shares and whether to allow Destler to 

trade in Loop shares without additional scrutiny.   

C. Lazerus Acted as an Unregistered Broker-Dealer  

66. During the course of the scheme, Lazerus acted as an unregistered 

broker.  He regularly sold Loop securities to the Elderly Investor and other 

investors for transaction-based compensation based on a percentage of the sale 

proceeds or in exchange for Loop stock, as described in paragraphs 47-54 herein.  

He also advised the Elderly Investor and other investors concerning the merits of 

their Loop investments, and spent significant effort to solicit and recruit 

investors to buy Loop stock at the request of Danks and Destler.  Some of the 

Elderly Investor’s Loop securities were even delivered to Lazerus for the benefit 

of the Elderly Investor, and were accompanied with correspondence that 

described Lazerus as the Elderly Investor’s “financial advisor.”  Lazerus also 

sold securities of additional issuers associated with Danks and Destler to the 

Elderly Investor and other investors.   

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67. Lazerus was not registered as a broker-dealer at the time of this 

activity.   

D. The Defendants and Relief Defendants Profited from the Scheme. 

68. As a result of their fraudulent and deceptive conduct, Stephens, 

Danks, and Destler were able to engage in manipulative activity and sell Loop 

stock without disclosing their ownership and control of the company.   

69. Stephens fraudulently sold Loop’s purportedly unrestricted stock 

in public market sales through the nominee entities, and in private sales to the 

Elderly Investor, which were brokered through Lazerus and Touchstone 

Advisors.  In order to further obfuscate his identity, in some instances Stephens 

directed that the profits from his Loop stock sales be directed to pay third parties 

for services for the benefit of Stephens’ family.  In total, Stephens made 

approximately $4.7 million in profits by selling Loop stock while hiding his 

control of the company.    

70. Danks and Destler also made significant profits by surreptitiously 

selling Loop stock.  Lazerus made approximately $30,000 in commissions by 

assisting Stephens, Danks, and Destler in the fraudulent sale of Loop stock.  

Lazerus also received Loop stock from Stephens, Danks, and Destler as 

compensation for assisting them in their fraudulent scheme.  For instance, on 

July 27, 2017, Lazerus was given 1,457 shares of Loop common stock as 

compensation for facilitating shares of Loop to the Elderly Investor.       

71. As described above, Solomita became the CEO and President of 

Loop and Chairman of the Board of Directors at the time of the reverse merger, 

in 2015.  On or about October 20, 2015, after Ventanas acquired unrestricted 

Loop stock from Stephens’ nominee entities, Danks helped arrange the sale of 

400,000 of Ventanas’ shares to a Quebec Company, Company A.  Company A 

paid Ventanas $437,490 for the shares on October 20, 2015.  Two days later, 

Ventanas wired $413,875 (representing 95% of the proceeds) to 8198381 

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Canada, Inc., Solomita’s company.   

72. While emails between Danks and Solomita characterize the above 

payment as a “loan,” there is no evidence that this purported loan was ever 

memorialized in writing or repaid.  There is also no evidence that Loop or 

Solomita earned the funds and thus has a legitimate claim.  The payment 

represents proceeds from the fraudulent scheme – a transfer of Ventanas’ assets 

from Danks to Solomita in a manner designed by the Defendants to hide the 

origin of the funds.              

  

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FIRST CLAIM FOR RELIEF 

Fraud in the Offer or Sale of Securities 

Violations of Sections 17(a)(1) and (3) of the Securities Act 

(against Defendants Stephens, Danks, Destler, and Lazerus) 

 

73. The SEC realleges and incorporates by reference paragraphs 1 

through 72 above. 

74. By reason of the conduct described above, Defendants Stephens, 

Danks, Destler, and Lazerus, in connection with the offer or sale of securities, by 

the use of the means or instrumentalities of interstate commerce or of the mails, 

directly or indirectly, acting intentionally, knowingly, recklessly or negligently 

(i) employed devices, schemes, or artifices to defraud; and (ii) engaged in 

transactions, practices, or courses of business which operated or would operate 

as a fraud or deceit upon any persons, including purchasers or sellers of the 

securities.   

75. Defendants Stephens, Danks, Destler, and Lazerus, with scienter, 

employed devices, schemes and artifices to defraud; and with scienter or 

negligence, engaged in transactions, practices, or courses of business which 

operated or would operate as a fraud or deceit upon the purchaser. 

76. By reason of the conduct described above, Defendants Stephens, 

Danks, Destler, and Lazerus violated Securities Act Sections 17(a)(1) and (3) [15 

U.S.C. §77q(a)(1) and (3)]. 

  

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SECOND CLAIM FOR RELIEF 

Fraud in Connection with the Purchase and Sale of Securities 

Violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) 

(against Defendants Stephens, Danks, Destler, and Lazerus) 

 
77. The SEC realleges and incorporates by reference paragraphs 1 

through 72 above. 

78. By reason of the conduct described above, Stephens, Danks, 

Destler, and Lazerus, directly or indirectly, in connection with the purchase or 

sale of securities, by the use of the means or instrumentalities of interstate 

commerce or of the mails, or of any facility of any national securities exchange, 

intentionally, knowingly or recklessly, (i) employed devices, schemes, or 

artifices to defraud; and (ii) engaged in acts, practices, or courses of business 

which operated or would operate as a fraud or deceit upon any persons, 

including purchasers or sellers of the securities. 

79. By reason of the conduct described above, defendants Stephens, 

Danks, Destler, and Lazerus violated Exchange Act Section 10(b) [15 U.S.C. 

§78j(b)] and Rules 10b-5(a) and (c) [17 C.F.R. §240.10b-5(a) and (c)] 

thereunder. 

  

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THIRD CLAIM FOR RELIEF 

Misstatements 

Violation of Section 10(b) of the Exchange act and Rule 10b-5(b)  

(against Defendants Danks and Destler) 

80. The SEC realleges and incorporates by reference paragraphs 1 

through 72 above. 

81. By reason of the conduct described above, Defendants Danks and 

Destler, directly or indirectly, acting intentionally, knowingly or recklessly, in 

connection with the purchase or sale of securities, by use of the means or 

instrumentalities of interstate commerce or the facilities of a national securities 

exchange or the mails, made untrue statements of material fact or omitted to 

state material fact(s) necessary to make the statements made not misleading in 

light of the circumstances under which they were made. 

82. By reason of the conduct described above, Defendants Danks and 

Destler violated, and unless enjoined will continue to violate, Section 10(b) of 

the Exchange Act [15 U.S.C. §78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R. 

§240.10b-5(b)]. 

  

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FOURTH CLAIM FOR RELIEF 

Violation of Section 15(a) of the Exchange Act 

(against Defendant Lazerus) 

83. The SEC realleges and incorporates by reference paragraphs 1 

through 72 above. 

84. Defendant Lazerus, by engaging in the conduct described above, 

either directly or indirectly, made use of the mails or means or instrumentalities 

of interstate commerce to effect transactions in, or to induce or attempt to induce 

the purchase or sale of, securities, without being registered as a broker or dealer 

in accordance with Section 15(b) of the Exchange Act [15 U.S.C. §78o(b)]. 

85. By reason of the conduct described above, Lazerus violated and, 

unless enjoined, will continue to violate Section 15(a) of the Exchange Act [15 

U.S.C. §78o(a)(1)]. 

 

  

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FIFTH CLAIM FOR RELIEF 

OTHER EQUITABLE RELIEF INCLUDING UNJUST ENRICHMENT AND 
CONSTRUCTIVE TRUST (against Relief Defendants) 

86. The SEC realleges and incorporates by reference paragraphs 1 

through 72 above. 

87. Section 21(d)(5) of the Exchange Act [15 U.S.C. §78u(d)(5)] 

states “In any action or proceeding brought or instituted by the Commission 

under any provision of the securities laws, the Commission may seek, and any 

Federal court may grant, any equitable relief that may be appropriate or 

necessary for the benefit of investors.” 

88. The Relief Defendants have received funds derived from the 

unlawful acts, practices and scheme of the Defendants under circumstances 

dictating that, in equity and good conscience, they should not be allowed to 

retain such funds. 

89. Further, specific property acquired or improved by the Relief 

Defendants is traceable to Defendants’ wrongful acts, and there is no reason in 

equity why the Relief Defendants should be entitled to retain that property. 

90. As a result, the Relief Defendants are liable for unjust enrichment 

and should be required to return their ill-gotten gains, in an amount to be 

determined by the Court.  The Court should also impose a constructive trust on 

property in the possession of the Relief Defendants that is traceable to the 

Defendants’ wrongful acts. 

  

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PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that the Court: 

Issue findings of fact and conclusions of law that Defendants committed the 

alleged violations. 

I. 

Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of 

Civil Procedure, permanently enjoining Defendants Stephens, Danks, Destler, and 

Lazerus, and their officers, agents, servants, employees and attorneys, and those 

persons in active concert or participation with any of them, who receive actual notice 

of the judgment by personal service or otherwise, and each of them, from violating 

Section 17(a) of the Securities Act [15 U.S.C. §77q(a)], and Section 10(b) of the 

Exchange Act [15 U.S.C. §§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-

5]. 

II. 

Issue a judgment, in a form consistent with Rule 65(d) of the Federal Rules of 

Civil Procedure, permanently enjoining Defendant Lazerus, and his officers, agents, 

servants, employees and attorneys, and those persons in active concert or 

participation with any of them, who receive actual notice of the judgment by personal 

service or otherwise, and each of them, from violating Section 15(a) of the Exchange 

Act. 

III. 

Order Defendants and Relief Defendants to disgorge all funds received from 

their illegal conduct, together with prejudgment interest thereon, pursuant to Section 

21(d)(7) of the Exchange Act [15 U.S.C. §78u(d)(7)]. 

IV. 

Order Defendants to pay civil penalties pursuant to Section 20(d) of the 

Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 

U.S.C. § 78u(d)(3)]. 

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V. 

Enter an order barring Defendants from participating in any offering of a penny 

stock, pursuant to Section 20(g) of the Securities Act [15 U.S.C. § 77t(g)] and Section 

21(d) of the Exchange Act [15 U.S.C. § 78u(d)]. 

VI. 

Enter an order barring Defendants Stephens, Danks and Destler from serving as 

an officer or director of a public company pursuant to Section 20(e) of the Securities 

Act [15 U.S.C. § 77t(e)] and 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)]. 

VII. 

Retain jurisdiction of this action in accordance with the principles of equity and 

the Federal Rules of Civil Procedure in order to implement and carry out the terms of 

all orders and decrees that may be entered, or to entertain any suitable application or 

motion for additional relief within the jurisdiction of this Court. 

VIII. 

Grant such other and further relief as this Court may determine to be just and 

necessary.  

 

JURY DEMAND 

The Commission demands a jury in this matter for all claims so triable.   

 

Dated:   September 30, 2022   

 s/ Kathryn Wanner 

KATHRYN WANNER  
(CA Bar. No. 269310) 
Local Counsel 
Email: [email protected] 
Securities and Exchange Commission 
444 S. Flower St., Suite 900 
Los Angeles, CA  90071 
Telephone: (323) 965-3998Facsimile: 
(213) 443-1904 

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AMY HARMAN BURKART (Mass Bar 
No. 651828) 
KATHLEEN BURDETTE SHIELDS 
(Mass Bar No.  637438) 
WILLIAM J. DONAHUE (Mass Bar No. 
631229) 
ALICIA REED (NY Bar No. 4913596) 
AMY GWIAZDA (Mass Bar No. 
663494) 
(617) 573-8904 (Shields Direct) 
(617) 573-5905 (Burkart Direct) 
Facsimile: (617) 573-4590 
 
Attorneys for Plaintiff 
Securities and Exchange Commission 

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