2025-06-26 sec-litreleases litigation_release 65 KB 2,375 chars

SEC v. American Patriot Brands, Inc.; Urban Pharms, LLC; DJ&S Property #1; TSL Distribution; Robert Y. Lee; Brian L. Pallas, et al., No. LR-26335, Central District of California (June 26, 2025) — Press Release

raw: American Patriot Brands, Inc.; Urban Pharms, LLC; DJ&S Property #1; TSL Distribution; Robert Y. Lee; Brian L. Pallas; J. Bernard Rice

American Patriot Brands, Inc.; Urban Pharms, LLC; DJ&S Property #1; TSL Distribution; Robert Y. Lee; Brian L. Pallas; J. Bernard Rice, No. 2:23-cv-05379 (June 26, 2025)

Caption
Securities and Exchange Commission v. American Patriot Brands, Inc.
Source PDF JSON
summary

The SEC secured partial summary judgment against American Patriot Brands, Inc. and its executives for a $30 million fraud scheme involving material misstatements and siphoned funds.

paragraph

The U.S. District Court granted partial summary judgment against American Patriot Brands, Inc., CEO Robert Y. Lee, and other executives for a scheme that raised over $30 million from 100 investors. The defendants were found liable for violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. The court determined that the defendants acted recklessly in misrepresenting company assets, financial performance, and the use of investor funds.

narrative

The U.S. District Court for the Central District of California granted partial summary judgment in favor of the SEC against American Patriot Brands, Inc. (APB), its CEO Robert Y. Lee, COO Brian F. Pallas, and former executive J. Bernard Rice. The defendants participated in a scheme that raised more than $30 million from over 100 investors through false and misleading statements regarding APB's assets, financial performance, and executive team. In addition to misrepresenting business performance, the defendants siphoned off millions of dollars for personal enrichment. The court found the defendants liable for violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. This liability stems from material misstatements and omissions that the court deemed reckless. While liability has been established, the final determination of remedies will occur at a later date.

Enriched metadata

Scheme
pre-ipo-fraud (80%)
Court
Central District of California
Case No.
2:23-cv-05379
Victim loss
$30,000,000
Victims
100
Entity
American Patriot Brands, Inc.
CIK
0001497647
Classified pre-ipo-fraud(confidence 80%). EDGAR detection: forms S-1/Form D/1-A· recall 72% / precision 8%. detection rule →
Statutes
Section 17(a) of the Securities ActSection 10(b) of the Securities Exchange ActRule 10b-5
Parties
Securities and Exchange CommissionAmerican Patriot Brands, Inc.Robert Y LeeDJ & S Property #1, LLCUrban Pharms, LLCJ. Bernard RiceTSL Distribution, LLCBrian L. PallasCastro Business Enterprises, LLCLegion Accounting Services, Inc.Puerto Rico One CorporationDJ&S Property #1TSL Distribution
Keywords
american patriotpatriot brandsfalse misleadingmisleading statementssecapburban pharmsbrian pallasbernard ricesecurities exchangepartial summaryllcsecuritiesamericanpatriot

Exhibits & Attached Documents (1)

Extracted insights

Dollar amounts 1
  • $30.00M $30 million $10M–$100M
Entities 3
  • agency partial summary judgment to the sec against defendants
  • agency Securities and Exchange Commission
  • court u.s. district court for the central district of california
Triples 7
  • U.S. Securities And Exchange Commission charged American Patriot Brands, Inc., Robert Y. Lee, Brian F. Pallas, J. Bernard Rice, Urban Pharms, LLC, DJ&S Property #1, LLC, and TSL Distribution, LLC
  • American Patriot Brands, Inc. and Others raised more than $30 million from more than 100 investors
  • American Patriot Brands, Inc. and Others siphoned off millions of those funds to enrich themselves
  • U.S. Securities And Exchange Commission alleged that Defendants defrauded investors through false and misleading statements about the company
  • U.S. Securities And Exchange Commission moved for partial summary judgment against Defendants for false and misleading statements about APB’s assets, security, financial performance, executive team, and use of funds
  • U.S. District Court for the Central District of California granted partial summary judgment to the SEC against Defendants
  • Court found that Defendants acted at least recklessly and violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
PDF (from attached: judgment)
In re Oracle Corp. Sec. Litig. · Source
Text layers
Extracted body text (2,375c) 
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 26335 / June 26, 2025 Securities and Exchange Commission v. American Patriot Brands, Inc., et al., No. 2:23-cv-05379 (C.D. Cal.) (filed Mar. 16, 2023) Court Grants Partial Summary Judgment in Fraudulent Offering Case Against Cannabis Company, CEO, and Others On June 16, 2025, the U.S. District Court for the Central District of California granted the SEC partial summary judgment against American Patriot Brands, Inc. (“APB”), a cannabis cultivation and distribution company; CEO Robert Y. Lee; COO Brian F. Pallas; alleged former executive J. Bernard Rice; and APB subsidiaries Urban Pharms, LLC, DJ&S Property #1, LLC, and TSL Distribution, LLC (collectively, the “Defendants”). The SEC previously charged these Defendants for their alleged participation in a long-running scheme in which they raised more than $30 million from more than 100 investors and siphoned off millions of those funds to enrich themselves. The SEC’s complaint, originally filed in the U.S. District Court for the District of Puerto Rico and subsequently transferred to the Central District of California, alleged that these Defendants defrauded investors through a series of false and misleading statements about various aspects of the company. The complaint charged the Defendants with violating the antifraud provisions of the securities statutes. Following the close of discovery, the SEC moved for partial summary judgment as to the liability of these Defendants for certain allegedly false and misleading statements and omissions concerning (1) APB’s assets; (2) security and collateral for investment funds; (3) the financial and business performance of APB; (4) the involvement of a prominent individual as part of APB’s executive team; and (5) APB’s use of investors’ funds. In granting the SEC’s motion, the Court found that these false and misleading statements and omissions were material, and that each of the Defendants acted at least recklessly in making these false and misleading statements, finding Defendants liable for violating Section 17(a) of the Securities Act of 1933, as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court will determine remedies at a later time. The SEC’s litigation is led by Eugene Hansen and Samantha Williams and supervised by James Carlson.
OCR text (2,375c · html-text · 99% conf) 
U.S. SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 26335 / June 26, 2025 Securities and Exchange Commission v. American Patriot Brands, Inc., et al., No. 2:23-cv-05379 (C.D. Cal.) (filed Mar. 16, 2023) Court Grants Partial Summary Judgment in Fraudulent Offering Case Against Cannabis Company, CEO, and Others On June 16, 2025, the U.S. District Court for the Central District of California granted the SEC partial summary judgment against American Patriot Brands, Inc. (“APB”), a cannabis cultivation and distribution company; CEO Robert Y. Lee; COO Brian F. Pallas; alleged former executive J. Bernard Rice; and APB subsidiaries Urban Pharms, LLC, DJ&S Property #1, LLC, and TSL Distribution, LLC (collectively, the “Defendants”). The SEC previously charged these Defendants for their alleged participation in a long-running scheme in which they raised more than $30 million from more than 100 investors and siphoned off millions of those funds to enrich themselves. The SEC’s complaint, originally filed in the U.S. District Court for the District of Puerto Rico and subsequently transferred to the Central District of California, alleged that these Defendants defrauded investors through a series of false and misleading statements about various aspects of the company. The complaint charged the Defendants with violating the antifraud provisions of the securities statutes. Following the close of discovery, the SEC moved for partial summary judgment as to the liability of these Defendants for certain allegedly false and misleading statements and omissions concerning (1) APB’s assets; (2) security and collateral for investment funds; (3) the financial and business performance of APB; (4) the involvement of a prominent individual as part of APB’s executive team; and (5) APB’s use of investors’ funds. In granting the SEC’s motion, the Court found that these false and misleading statements and omissions were material, and that each of the Defendants acted at least recklessly in making these false and misleading statements, finding Defendants liable for violating Section 17(a) of the Securities Act of 1933, as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court will determine remedies at a later time. The SEC’s litigation is led by Eugene Hansen and Samantha Williams and supervised by James Carlson.

Related documents (2)