SEC v. GEORGE STUBOS, No. 1:22-cv-04674, Southern District of New York (Apr. 15, 2024)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE
COMMISSION,
   Plaintiff,
 v.

GEORGE STUBOS,
   Defendant,
and

DORI-ANN STUBOS,
              Relief Defendant.

Civil Action No. 22-CV-____ (___)

JURY TRIAL DEMANDED

COMPLAINT
 Plaintiff, Securities and Exchange Commission (the “Commission”), alleges the
following against Defendant George Stubos (“Stubos”) and Relief Defendant Dori-Ann Stubos:
SUMMARY
1. This is a securities fraud enforcement action.  From at least March 2012 through
at least April 2015 (the “Relevant Period”), Stubos engaged in a sophisticated scheme that
defrauded numerous retail investors by concealing the fact that he, in concert with others,
controlled the stock of several small and thinly-traded U.S. companies including, Petrosonic
Energy Inc. (“Petrosonic”) and Ener-Core, Inc. (“Ener-Core” and collectively, the “Issuers” (a
term commonly applied to companies that issue stock)).
2. Instead of holding shares in his own name, Stubos used foreign nominee
companies to hide his control of the Issuers and their stock.  He then directed sales of the Issuers’
shares into the market.  Stubos’ sales of stock violated the U.S. securities laws because he did not
register his sales of those shares with the Commission and did not disclose accurate information

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about his control over the Issuers.  As a result of Stubos’ deceptive conduct, investors buying the
shares he sold were deprived of important information – that the stock they purchased was being
dumped by the person controlling that company.  Stubos’ fraudulent scheme generated
approximately $11 million in illicit proceeds.
3. As part of his scheme, Stubos also frequently sought to increase demand for the
Issuers’ stock by funding various promotions touting the stock.  The promotions that Stubos
sponsored were misleading because they did not disclose that the Issuers’ largest stockholder
was paying to encourage potential investors to buy the stock while he would be selling the stock.
Stubos’ promotions were successful.  As the price and trading volume of the Issuers’ stock
increased during each promotion, Stubos began selling his shares into the market.
4. Stubos also engaged in manipulative trading that enabled him to sell more of the
Issuers’ stock.  For at least one of the Issuers, Ener-Core, Stubos directed purchases and sales of
its stock between different foreign brokerage accounts controlled by his associates.  His purpose
in making these trades was to make investors think there was active market trading in Ener-Core
stock and thus increase investors’ demand for the stock.
Stubos Violated the Securities Laws
5. As a result of the conduct alleged herein, Stubos violated Sections 17(a)(1) and
(3) of the Securities Act of 1933 (“Securities Act”), Section 9(a)(2) of the Securities Exchange
Act of 1934 (“Exchange Act”) and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c)
thereunder.
6. The Commission seeks a permanent injunction against Stubos, enjoining him
from engaging in the transactions, acts, practices, and courses of business alleged in this
Complaint; disgorgement of all ill-gotten gains from the unlawful conduct set forth in this

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Complaint, together with prejudgment interest pursuant to Section 21(d) of the Exchange Act; an
order barring Stubos from participating in any offering of a penny stock, pursuant to Section
20(g) of the Securities Act and/or Section 21(d) of the Exchange Act; and a conduct-based
injunction enjoining Stubos from directly or indirectly, including but not limited to, through an
entity owned or controlled by him, participating in the issuance, purchase, offer, or sale of any
security; provided, however, that such injunction shall not prevent Stubos from purchasing or
selling securities listed on a national securities exchange for his own personal account; and such
other relief as the Court may deem appropriate.
7. The Commission also seeks relief against Dori-Ann Stubos (the “Relief
Defendant”) who received proceeds of the Defendant’s unlawful acts, practices and schemes and
should not be entitled to retain those illegally-derived proceeds.
8. The Commission seeks a temporary restraining order and a preliminary injunction
to freeze assets held by the Defendant and the Relief Defendant and to preserve those assets
necessary to satisfy an eventual judgment against the Defendant.  The Commission will also seek
a repatriation order to facilitate the prompt resolution of this matter on the merits.
JURISDICTION AND VENUE
9. This Court has jurisdiction over this action pursuant to Section 22(a) of the
Securities Act [15 U.S.C. §77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act [15
U.S.C. §§78u(d), 78u(e), 78aa].
10. Venue lies in this Court pursuant to Section 22(a) of the Securities Act [15 U.S.C.
§77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §78aa].  Certain of the acts, practices,
transactions and courses of business alleged in this Complaint occurred within the Southern
District of New York, and were effected, directly or indirectly, by making use of means or

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instrumentalities of transportation or communication in interstate commerce, or the mails.  For
example, during the Relevant Period, certain individuals who reside in the Southern District of
New York purchased the stock of Petrosonic and Ener-Core.
DEFENDANT
11. George Stubos, age 55, is a Canadian citizen and a resident of Vancouver,
Canada.  On June 28, 2007, the British Columbia Securities Commission (“BCSC”) barred
Stubos from participation in the securities industry and from acting as a director or officer of any
issuer for a period of two years, because he traded in the stock of an issuer where he was a
director and insider and failed to file insider reports required under Canadian law.  The BCSC
also barred Stubos, an investment adviser at the time, from participating in any investor relations
activities for two years.  On September 3, 1998, the Vancouver Stock Exchange (“Exchange”)
barred Stubos from the Exchange for one year followed by one year of supervision upon return
to the industry and ordered him to pay fines and disgorgement for executing trades in a client
account without the client’s permission.
RELIEF DEFENDANT
12. Dori-Ann Stubos, age 55, is a Canadian citizen, a resident of Vancouver, Canada
and the wife of George Stubos.  George Stubos transferred, directly or indirectly, at least $1.3
million derived from his illicit stock sales for the purchase of a house in Palm Springs, California
in the name of Dori-Ann Stubos.
RELATED INDIVIDUALS AND EN
TITIES
13. Morrie N. Tobin, age 57, is a Canadian citizen and was a resident of Los Angeles,
California.  On February 27, 2019, Tobin pled guilty to charges of conspiracy to commit
securities fraud and aiding and abetting securities fraud.  See U.S. v. Tobin, 18-CR-10444 (D.

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Mass.).  The Commission filed an action against Tobin on November 27, 2018, and on April 16,
2021, the District Court entered final judgment against Tobin enjoining him from future
violations of the registration provisions of the Securities Act and the antifraud provisions of the
Securities Act and the Exchange Act and imposing a penny stock bar.  See SEC v. Tobin et al.,
No. 18-CV-12451 (D. Mass.).
14. Petrosonic Energy Inc. (“Petrosonic”) was a Nevada corporation with its principal
place of business in Los Angeles, California, and during the Relevant Period, it was purportedly
in the business of petroleum refining.  During the Relevant Period, Petrosonic’s common stock
was registered with the Commission under Section 12(g) of the Exchange Act.  The Commission
suspended trading in the securities of Petrosonic on September 20, 2018 because Petrosonic had
failed to file required periodic reports with the Commission since September 30, 2016.  On
August 22, 2019, the Commission revoked the registration of its shares.  During the Relevant
Period, Petrosonic’s securities were quoted on OTC Link,
 operated by OTC Markets Group, Inc.,
under the symbol “PSON,” and Petrosonic filed periodic reports with the Commission pursuant
to Section 13(a) of the Exchange Act and the rules thereunder.
15. Ener-Core, Inc., (“Ener-Core”) is a Delaware corporation with its principal place
of business in Laguna Niguel, California, and during the Relevant Period, it purportedly designed
and manufactured systems producing continuous energy.  Ener-Core’s common stock was
registered with the Commission under Section 12(g) of the Exchange Act in 2015.  During the
Relevant Period, Ener-Core’s securities were quoted on OTC Link under the symbol “ENCR.”
BACKGROUND AND DEFINITIONS
16. Before selling stock, persons who control the stock of public companies (“control
persons”) are required to: (a) register such sales with the Commission pursuant to Section 5 of

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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.  In
addition, for public companies whose securities are registered under Section 12 of the Exchange
Act, investors owning 5% or more of such company’s stock are required publicly to disclose
their ownership interest, while investors owning 10% or more of such company’s stock are
required publicly to disclose all of their trading in that stock, regardless of quantity.  Such
registration requirements, sale restrictions, and disclosure obligations are safeguards designed to
protect the market for purchases and sales of stock, to inform investors about the nature of the
stock they are holding or considering buying, and from whom they would be buying that stock.
17. 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 (i.e., a control person).  “Control” means the power to direct management and policies of
the company in question.  Typically, affiliates include officers, directors and controlling
shareholders but any person who is under “common control” with or has common control of an
issuer is also an affiliate.
18. The Over-the-Counter (“OTC”) Markets is a stock quotation service based in
New York 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).
Public companies that do not have an obligation to file reports with the Commission may,
nonetheless, choose to file public reports (such as quarterly and annual statements) on the OTC
Markets website for investors to review and consider when making investment decisions.
19. “Penny Stock,” as used herein, generally refers to a security issued by a very

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small company that trades at less than $5 per share.  During the Relevant Period, both Petrosonic
and Ener-Core were penny stocks.
20. “Restricted stock” includes stock of a publicly traded company (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 operation, risk factors, and management.  It also
identifies any person or group who is the beneficial owner of more than 5% of the company’s
securities.
21. “Unrestricted stock” is stock that may legally be offered and sold in the public
securities marketplace by a non-affiliate, ordinarily having previously been subject to a
registration statement.  Registration statements are transaction specific, 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.  When a control person
buys publicly traded or otherwise unrestricted shares in a company that s/he controls, those
shares automatically become subject to the legal restrictions on sales by an affiliate. Such legal
restrictions include strict limits on 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.

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22. “Float” is the amount of unrestricted shares on deposit with broker-dealers and
available for trading in the public market.
23. A “transfer agent” is a company which, 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.
The Sharp Group
24. Stubos utilized the illicit services of Frederick L. Sharp and his employees (“the
Sharp Group”) to facilitate each step of his fraud.  The Sharp Group’s operators were sued by the
Commission for violating the securities laws.  See SEC v. Sharp, et. al., No. 1:21-cv-11276-
WGY (D. Mass. filed Aug. 5, 2021).  Sharp and one of his employees, Courtney Kelln, were also
charged criminally by the United States Department of Justice.  See U.S. v. Sharp, et. al., 1:21-
mj-07182-JCB (D. Mass filed Aug. 4, 2021).
25. From at least 2010 and continuing after the Relevant Period, the Sharp Group was
in the business of facilitating illegal stock sales in the public securities markets.  The Sharp
Group provided a variety of services to help its clients (including Stubos), who were public
company control persons, conceal their identities when selling the stock of companies they
controlled.  By utilizing the Sharp Group’s services to disguise his identity and his controlling
positions, Stubos fraudulently concealed the fact that he, a public company control person, was
selling large blocks of stock to unsuspecting investors.
26. The Sharp Group deliberately concealed the identities of its clients through the
array of services it offered, including: forming and providing offshore nominee companies that
held shares for undisclosed control persons; arranging for clients to deposit stock in offshore

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trading platforms to obfuscate the control persons’ association with their public company penny
stock; and providing and administering an encrypted communication network by purchasing,
configuring and delivering devices which the Sharp Group referred to as “xPhones.”  The
xPhones could only be used for communications on the Sharp Group’s encrypted
communications network, and xPhone users communicated using code-names and numbers.  As
detailed below, Stubos utilized all the foregoing Sharp Group services in carrying out his
fraudulent scheme.
27. The Sharp Group also provided additional services to its clients to further the
clients’ fraudulent schemes such as: administering a proprietary accounting system, referred to as
“Q,” that tracked a client’s total stock holdings and sales across various nominee shareholders
and trading platforms; paying out the proceeds of illegal stock sales at clients’ direction to
accounts around the world and/or to clients’ internal accounts with the Sharp Group; arranging to
route such payments by circuitous methods designed to conceal the source of funds; and
fabricating documents, such as invoices, to conceal the nature and source of the payments.
Stubos also utilized these additional Sharp Group services in carrying out his fraudulent scheme.
Stubos’ codenames on xPhone messages and in the Q accounting system were “Lion” and “77.”
DEFENDANT’S PETROSONIC FRAUD
28. Stubos became a Sharp client in 2012.  Shortly after becoming a client, Stubos
began transferring his controlling position in Petrosonic to the Sharp Group.  In late March and
early April 2012, the Sharp Group received two deposits of purportedly unrestricted shares of
Petrosonic, totaling approximately 2.6 million shares, into Stubos’ Q account.  One month later,
Petrosonic underwent an 11.25-for-1 forward stock split resulting in Stubos holding 29.6 million
purportedly unrestricted shares of Petrosonic with the Sharp Group.  Later that year, Stubos

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transferred an additional 14.6 million restricted shares of Petrosonic to the Sharp Group.  As of
December 31, 2012, Petrosonic had 70.3 million shares outstanding, and Stubos, through the
Sharp Group, held 56% of its outstanding shares.  Therefore, Stubos was an affiliate of
Petrosonic.
29. The Sharp Group supplied various nominee companies to hold Stubos’ penny
stock.  Stubos caused the Sharp Group to strategically split the stock into blocks of stock of less
than 5% of the total outstanding stock to be held in the name of each nominee company.  As
discussed above, breaking the shares into blocks of less than 5% ownership was done to avoid
reporting requirements and restrictions and scrutiny by brokerage firms and other market
participants like transfer agents.
30. In February 2013, Stubos demonstrated his knowledge of the 5% ownership
reporting requirement in an encrypted xPhone message exchange with Sharp.  In that exchange,
Sharp suggested moving 6.6 million purportedly free-trading shares but wanted to make sure that
the stock is held in two positions, so that each position would be under 5% of the total
outstanding stock, to avoid scrutiny from brokers and others.  Stubos responded, “Ok, sounds
like a plan...the restricted [shares] should be registered in 4 new shareholders, with 2 of them
having 3.5 [million shares]...”  When Sharp questioned Stubos stating that 3.5 million shares is
more than 5%, Stubos corrected him and explained that 3.5 million shares are less than 5%,
because “...having closed 12 million shares at .25 we now have 65m + 12m outstanding so 77
million shares out[standing].”
31. Beginning in April 2012, the Sharp Group began depositing Stubos’ Petrosonic
shares into various Sharp Group-administered nominee companies’ overseas brokerage accounts.
By December 31, 2012, Stubos, using the Sharp Group’s services, accounted for approximately

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98% of all Petrosonic stock deposits which had been made with any brokers in the world (the
“float”).  These purportedly unrestricted shares held by the Sharp Group’s nominee companies
should have been restricted because Stubos retained control and ownership of those shares.
Misleading Stock Promotion
32. From 2012 through 2014, Stubos secretly funded multiple stock promotions of
Petrosonic to create interest in the stock among investors, increase demand for the stock, and
thus, drive up Petrosonic’s stock price and trading volume.  Stubos hid his involvement in
funding stock promotions in various ways.  First, as evidenced by Q accounting records, Stubos
used the Sharp Group to make payments to various stock promoters, thus concealing his role in
funding the promotions.  Second, he funneled Sharp Group proceeds to a Washington state
corporation that he controlled to pay U.S. promoters, including many of the same promoters he
paid via the Sharp Group.  These promotions were misleading because they did not disclose that
Stubos, the largest stockholder and an affiliate, was funding the promotions that encouraged
potential investors to buy the stock at a time when he would be selling the stock.  Third, Stubos
used a foreign entity created by the Sharp Group (the “Belize Nominee”) to hire stock promoters.
33. In June 2013, Stubos asked Sharp to create a nominee entity for Stubos to use to
hire stock promoters, adding yet another layer of disguise between Stubos and the stock
promotions.  Sharp set up the Belize Nominee in Belize on behalf of Stubos.  In an encrypted
xPhone message, Stubos asked Sharp to create an email account for the Belize Nominee so
Stubos could contact promoters without having discoverable communications linked to himself:
“I will need to be able to interact through this email, supposedly from ‘them.’”  Q accounting
records show that Sharp charged Stubos $2,900 for the cost to incorporate the Belize Nominee
on June 7, 2013.  After Sharp incorporated the Belize Nominee, Stubos used it to hire stock

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promoters.  Petrosonic promotions contained misleading fine print stating that the Belize
Nominee, not Stubos (an affiliate of Petrosonic), had paid for the promotions and related
marketing materials.
34. From June 2012 through October 2014, Stubos directed at least $3.3 million in
payments to various promoters from his illicit Petrosonic trading proceeds using the methods
described above.  Stubos paid for promotions of Petrosonic without disclosing in those
promotions that he was an affiliate of the issuer.  The promotions were thus misleading.  As the
price and trading volume of Petrosonic stock began to rise in response to each of those
promotions, Stubos began selling his shares into the market via the Sharp Group-administered
nominee companies.  This pattern of misleading promotions, followed by Stubos sales to profit
on those promotions, was repeated several times.   From June 2012 through April 2015, Stubos
sold over 23 million shares of Petrosonic using the Sharp Group, generating approximately $18.5
million in net trading proceeds.  The graph below illustrates a series of increases in trading
volume and price that occurred from June 2012 through October 2014 as a result of Stubos’

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conduct:

Partnership with Tobin
35. In 2013, Stubos partnered with Morrie Tobin in the Petrosonic scheme.  Tobin
agreed to raise money for Petrosonic from private investors.  These private investors provided an
influx of $3 million to Petrosonic, after which Stubos’ promotional efforts and corresponding
stock sales increased substantially.  Stubos paid Tobin approximately $3.4 million dollars
generated from Petrosonic trading proceeds in exchange for Tobin’s services related to the
private investments.
Stubos Manipulated Petrosonic’s Stock Price
36. While Stubos was selling millions of Petrosonic shares through the Sharp Group
during the promotions he funded, he also directed manipulative trading to drive up the price and
liquidity of the stock he was trying to sell.  This manipulative activity was designed to deceive
investors about the existence of an active market in Petrosonic stock.  Specifically, Stubos
directed Sharp Group traders via encrypted messages strategically to buy Petrosonic stock on

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numerous occasions in order to support and/or inflate its price.  For example, on September 9,
2013, Stubos directed a Sharp Group trader to stop selling Petrosonic stock and switch to buying
the stock instead: “[W]e should step away from the offers and put some support at the previous
low [price.]”  Sharp Group records show that on September 9, Stubos purchased 13,000 shares
and sold 72,117 shares.  The buy orders and sell orders were placed from different Sharp Group
nominees’ brokerage accounts in different countries so that they would not appear linked.  By
purchasing small amounts of Petrosonic stock, Stubos was able to increase or maintain its price.
Later, Stubos was able to capitalize on the manipulated price and continue to sell.
37. Stubos was a control person of Petrosonic, because he owned more than 50% of
its outstanding stock.  Therefore, he was required to disclose his holdings on filings with the
Commission.  Stubos was also required to disclose all of his trading of Petrosonic stock and was
subject to limitations on the amount of Petrosonic stock he could sell.  During the Relevant
Period, Stubos never disclosed his control over Petrosonic stock and never registered any of his
sales of his Petrosonic shares with the Commission as required under the securities laws.
DEFENDANT’S ENER-CORE FRAUD
38. From 2013 through 2014, Stubos engaged in a fraudulent scheme to sell the
securities of a second issuer, Ener-Core.  In April 2013, Stubos acquired the public shell
company which would later become Ener-Core from another Sharp Group client for $325,000.
A shell company is a company that has little to no business operations and/or non-cash assets for
an extended period of time.
39. By acquiring the Ener-Core shell, Stubos gained control of its outstanding stock.
Following the purchase, Sharp Group accounting records show Stubos’ account received
virtually all the purportedly unrestricted and restricted shares of Ener-Core that had been issued

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by the company.  As of June 2013, Stubos controlled 99.7% of Ener-Core’s purportedly
unrestricted stock.
40. Beginning in May 2013, for the benefit of Stubos, the Sharp Group transferred his
Ener-Core shares to the nominee companies it supplied,  strategically split those shares into
blocks of stock of less than 5% of the total outstanding stock for each nominee shareholder, and
then deposited those shares with brokerage firms in order to be ready for market sale.  From
November 2013 through October 2014, Stubos directed at least $1.1 million in payments to stock
promoters, including many of the same promoters he used to promote Petrosonic.  Like
Petrosonic, Ener-Core promotional newsletters’ fine print misleadingly stated that the Belize
Nominee was the paying party for the promotion.  Similar to the Petrosonic scheme, Stubos
continued to direct all trading in Ener-Core using the Sharp Group and sold the stock during each
promotional campaign that he orchestrated in order to profit from the demand he had created.
From June 2013 through October 2014, Stubos dumped 9.4 million shares of Ener-Core into the
market, generating $2.9 million in net trading proceeds.
Manipulative Trading
41. Before Stubos began aggressively selling Ener-Core shares into the market, he
engaged in manipulative trading to inflate the price of Ener-Core stock and to give a false
appearance of active trading in the market.  For example, from August 23 through September 3,
2013, there was no trading in Ener-Core stock.  In order to reflect trading activity in the stock,
Stubos directed a Sharp Group trader via encrypted messages to start buying and selling the
stock on his behalf.  On September 3, Stubos wrote a n encrypted xPhone message with the
subject, ENCR: “We want to show a little bit of activity here on this one.  Nothing big but 15-
20k a day between 1.30 to 1.50 if you can manage so it looks natural...Almost a coincidence.”

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42. Nearly every day from September 5 through September 27, the Sharp Group
trader bought and sold Ener-Core stock in amounts ranging from approximately 8,000 to 15,000
shares.  The purchases and sales were made through different overseas brokerage accounts held
in the names of different nominee companies to give the appearance that different shareholders
were trading the stock.  On many of the trading days, the buy and sell quantities matched exactly.
The chart below shows examples of Stubos’ trading over that period of time compared to the
total market trading volume and the daily closing price.

43. Stubos was explicit in his encrypted messages with Sharp Group personnel about
the purpose of the trading he was directing: to give the appearance to unsuspecting investors that
Ener-Core was actively trading at increasing prices.  On September 25, 2013, Stubos wrote to a
Sharp Group trader, “Keep...on painting that tape [on] encr.”  “Painting the tape” colloquially
refers to a deceptive trading device that may involve buying and selling a security, for the
purpose of creating the appearance of active trading in order to increase interest in that stock.

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44. Stubos’ efforts were successful.  The chart below reflects Ener-Core’s price and
trading volume for August 2013 (the month before Stubos started the manipulative trading) and
September 2013 (when Stubos was on both sides of trading for the vast majority of the trading
days during the month).

45. Over the next several months, Stubos continued to direct the buying and selling of
Ener-Core shares in Sharp Group-administered overseas brokerage accounts.  The records from
the Q accounting system show that the buy orders and sell orders for these trades were placed
through different Sharp Group nominees’ brokerage accounts in different countries so they
would not appear to be connected.   From September 5, 2013 through December 31, 2013,
Stubos was on both sides of Ener-Core trading for 54 of the 72 possible trading days.
PROFITS AND TRANSFERS TO RELIEF DEFENDANT
46. As discussed above, from June 2012 through April 2015, Stubos sold over 23
million shares of Petrosonic using the Sharp Group, generating approximately $18.5 million in
 -
 2,000
 4,000
 6,000
 8,000
 10,000
 12,000
 14,000
 16,000
 18,000
 20,000
 $0.90
 $1.00
 $1.10
 $1.20
 $1.30
 $1.40
 $1.50
 $1.60
ENCR -Price and Volume (Aug -Sept 2013)
VolumeClose

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net trading proceeds. Q accounting records show that after costs including promotions and the
distributions to Tobin, Stubos’ Q account (the “LION Account") received approximately $10
million in net profits derived from Petrosonic trading.
47. Likewise, from June 2013 through October 2014, Stubos dumped 9.4 million
shares of Ener-Core into the market, generating $2.9 million in net trading proceeds.  Q
accounting records show that approximately $930,000 of those proceeds were transferred to the
LION Account.
48. Stubos then used the LION Account for his personal benefit, including directing
over CAD $1.5 million in payments to himself and the venture capital firm he owned.  The Lion
Account also show Stubos receiving over CAD $1.9 million in cash and gold coins.  Lastly,
Stubos directed the Sharp Group to wire approximately $3.6 million from his illicit trading
proceeds to an account he controlled at a Panamanian broker-dealer firm (the “Panamanian
Account”).
49. The xPhone messages show Stubos directing Sharp Group employees to issue
various wires from his LION Account to the Panamanian A ccount.  In particular, Stubos, directly
or indirectly, transferred $553,500 to the Panamanian A ccount on or about July 18, 2013 and
$1,252,000 on or about January 10, 2014.  In total, Q accounting records show Stubos directed
over $3.6 million of proceeds directed from the Sharp Group to the Panamanian Account.
50. In May 2014, wires for approximately $1.3 million were sent from the broker-
dealer holding the Panamanian Account to a title company in California to purchase a property in
Palm Springs, California in the name of Dori-Ann Stubos, George Stubos’ wife.  Through this
transfer, Stubos gave his illicit sale proceeds to Dori-Ann Stubos for no legitimate purpose or
consideration.

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ADDITIONAL ISSUERS’ PENNY STOCK SOLD BY STUBOS
51. In addition to the stock of Petrosonic and Ener-Core, Stubos’ scheme involved
utilizing the Sharp Group to control and sell the penny stock of other Issuers.  For example,
during 2013, Stubos, directly or indirectly, transferred purportedly unrestricted stock of Homie
Recipes, Inc. (“Homie”) to the Sharp Group.  The stock was divided and distributed to Sharp
Group-administered nominee companies in blocks of less than 5% of the company’s outstanding
stock.  In December 2015, Stubos expressed displeasure to Sharp about the amount it was
costing him to maintain Homie and its stock in Sharp’s custody and Sharp suggested that Stubos
might be able to sell the Homie shell company to another of his clients.  Stubos responded that
he would be “happy” to sell.  In August 2017, according to the Q system, Sharp managed the
sale of Homie and its stock to another one of his clients.  Stubos received a payment of $260,000
for the shell.  The Sharp client who bought the Homie shell changed its name and then sold its
stock in connection with his own promotional activities.
52. Stubos also appears to be involved, at least in part, with a similar scheme
involving a fourth issuer, Synergy CHC Corp (“Synergy”).  Through various encrypted xPhone
messages concerning Synergy, Stubos revealed his understanding of the illegal nature of his
actions and his fear of being discovered.  For example, on September 16, 2014, Stubos messaged
Kelln, a Sharp Group employee responsible for dividing and distributing stock to Sharp Group
nominee companies:
From: Celt (Kelln)
To:  77 (Stubos)
Subject: Just a thought

The shares are register to S1 holders.  We can lift their signatures and use
their shares to vote instead of transferring them all to nominees.  Up to you.

From: Lion (Stubos)

20

To: Celt (Kelln)
Subject: Re: Just a thought

Ok do it that way.  Easy.  Let’s not talk on the phone anymore.  Really scares
the shit out of me....Sorry to be blunt, but shit is scary out there and they are
listening, who knows?  Paranoid is good.

53. In another encrypted xPhone message, Stubos directed Kelln to provide votes for
a Synergy stockholder meeting on September 24, 2014, demonstrating his control over the
nominee companies that were the shareholders on paper.  On September 17, 2014, Stubos
messaged Kelln “vote all that we can for the resolutions with management.”  Kelln asked if he
needed names and he responded “No I just need the votes.”  On September 22, 2014, Stubos
again messaged Kelln about whether she could facilitate online voting instead of paper voting.
When she questioned how the process worked, Stubos responded, “I don’t f’n know? And my
moron partner just emailed the whole fucking thing to MY email.”  Stubos last email to Kelln
demonstrates his concern that evidence of his fraudulent conduct would be traceable to him
through his personal email.
FIRST CLAIM FOR RELIEF
FRAUD IN THE OFFER OR SALE OF SECURITIES
(Violations of Sections 17(a)(1) and (3) of the Securities Act by Stubos)

54. Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if
fully set forth herein.
55. By reason of the conduct described above, Stubos, in 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.

21

56. By reason of the conduct described above, Stubos violated Sections 17(a)(1) and
(3) of the Securities Act [15 U.S.C. §77q(a)(1) and (3)] and will continue to violate those
sections unless restrained and enjoined.
SECOND CLAIM FOR RELIEF
FRAUD IN CONNECTION WITH THE PURCHASE OR SALE OF SECURITIES
(Violations of Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) by Stubos.)

57. Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if
fully set forth herein.
58. By reason of the conduct described above, Stubos, 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.
59. By reason of the conduct described above, Stubos violated, and unless restrained
and enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and
Rules 10b-5(a) and (c) [17 C.F.R. §240.10b-5(a) and 5(c)] thereunder.
THIRD CLAIM FOR RELIEF
MARKET MANIPULATION
(Violations of Section 9(a)(2) of the Exchange Act by Stubos)

60.  Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if
fully set forth herein.
61. By reason of the conduct described above, Stubos effected, alone or with one or
more other persons, a series of transactions in at least one security that was not a government

22

security, that created actual or apparent active trading in that security, or raised or depressed the
price of that security, for the purpose of inducing the purchase or sale of that security by others.
62. By engaging in the conduct described above, Stubos violated, and unless
restrained and enjoined will continue to violate, Section 9(a)(2) of the Exchange Act [15 U.S.C.
§ 78i(a)(2)].
FOURTH CLAIM FOR RELIEF
OTHER EQUITABLE RELIEF, INCLUDING UNJUST ENRICHMENT AND
CONSTRUCTIVE TRUST
(against Dori-Ann Stubos)

63. Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if
fully set forth herein.
64. 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.”
65. Dori-Ann Stubos received investor funds derived from the unlawful acts,
practices and scheme of George Stubos under circumstances dictating that, in equity and good
conscience, she should not be allowed to retain such funds.
66. Further, specific property acquired or improved by Dori-Ann Stubos is traceable
to George Stubos’ wrongful acts, and there is no reason in equity why she should be entitled to
retain that property.
67. As a result, Dori-Ann Stubos is liable for unjust enrichment and should be
required to return her 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 Dori-Ann Stubos that is
traceable to George Stubos’ wrongful acts.

23

PRAYER FOR RELIEF
WHEREFORE, the Commission respectfully requests that this Court enter a Judgement
that:
A. Permanently restrains and enjoins Stubos and his agents, servants, employees and
attorneys, and those persons in active concert or participation with him who receive actual notice
of the injunction by personal service or otherwise, from:
1. violating Section 17(a) of the Securities Act [15 U.S.C. §§77q(a)],
violating 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], and violating Section 9(a) of the Exchange Act [15
U.S.C. §78i(a)]; and
2. directly or indirectly, including but not limited to, through any entity he
owns or controls, participating in the issuance, purchase, offer, or sale of any security;
provided, however, that such injunction shall not prevent him from purchasing or selling
securities listed on a national securities exchange for his own personal account;
B.  Bars Stubos 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 21(d) of the Exchange Act [15
U.S.C. §78u(d)];
C. Orders Stubos to disgorge, with prejudgment interest, all ill-gotten gains obtained
by reason of the unlawful conduct alleged in this Complaint pursuant to Section 21(d)(7) of the
Exchange Act [15 U.S.C. §78u(d)(7)];
D. Orders Dori-Ann Stubos to disgorge, with prejudgment interest, all ill-gotten
gains obtained by reason of the unlawful conduct alleged in the Complaint;
F. Retains jurisdiction over this action to implement and carry out the terms of all

24

orders and decrees that may be entered; and
G. Grants such other and further relief as this Court may deem just and proper.

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

DATED:  June 6, 2022.
     Respectfully submitted,
                               _/s/ Nita K. Klunder  _________________________
     Nita Klunder
     Kathleen Burdette Shields*
     Jennifer A. Cardello *
     Amy Gwiazda *

     SECURITIES AND EXCHANGE COMMISSION
     Boston Regional Office
     33 Arch St., 24
th
 Floor
     Boston, MA 02110
Phone: 617-573-8904 (Shields), 617-573-4577 (Cardello),
     Fax: 617-573-4590
     [email protected]; [email protected]

*Not admitted in the U.S. District Court for the Southern
District of New York

UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 

 

 
SECURITIES AND EXCHANGE 
COMMISSION, 
   Plaintiff, 
 v. 
 
GEORGE STUBOS,  
   Defendant, 
and 
 
DORI-ANN STUBOS, 
              Relief Defendant. 
 
 

 
 

Civil Action No. 22-CV-____ (___) 
 

JURY TRIAL DEMANDED 
 
 

 
COMPLAINT 

 Plaintiff, Securities and Exchange Commission (the “Commission”), alleges the 

following against Defendant George Stubos (“Stubos”) and Relief Defendant Dori-Ann Stubos: 

SUMMARY 

1. This is a securities fraud enforcement action.  From at least March 2012 through 

at least April 2015 (the “Relevant Period”), Stubos engaged in a sophisticated scheme that 

defrauded numerous retail investors by concealing the fact that he, in concert with others, 

controlled the stock of several small and thinly-traded U.S. companies including, Petrosonic 

Energy Inc. (“Petrosonic”) and Ener-Core, Inc. (“Ener-Core” and collectively, the “Issuers” (a 

term commonly applied to companies that issue stock)).   

2. Instead of holding shares in his own name, Stubos used foreign nominee 

companies to hide his control of the Issuers and their stock.  He then directed sales of the Issuers’ 

shares into the market.  Stubos’ sales of stock violated the U.S. securities laws because he did not 

register his sales of those shares with the Commission and did not disclose accurate information 

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2 
 

about his control over the Issuers.  As a result of Stubos’ deceptive conduct, investors buying the 

shares he sold were deprived of important information – that the stock they purchased was being 

dumped by the person controlling that company.  Stubos’ fraudulent scheme generated 

approximately $11 million in illicit proceeds.      

3. As part of his scheme, Stubos also frequently sought to increase demand for the 

Issuers’ stock by funding various promotions touting the stock.  The promotions that Stubos 

sponsored were misleading because they did not disclose that the Issuers’ largest stockholder 

was paying to encourage potential investors to buy the stock while he would be selling the stock.  

Stubos’ promotions were successful.  As the price and trading volume of the Issuers’ stock 

increased during each promotion, Stubos began selling his shares into the market.   

4. Stubos also engaged in manipulative trading that enabled him to sell more of the 

Issuers’ stock.  For at least one of the Issuers, Ener-Core, Stubos directed purchases and sales of 

its stock between different foreign brokerage accounts controlled by his associates.  His purpose 

in making these trades was to make investors think there was active market trading in Ener-Core 

stock and thus increase investors’ demand for the stock. 

Stubos Violated the Securities Laws 

5. As a result of the conduct alleged herein, Stubos violated Sections 17(a)(1) and 

(3) of the Securities Act of 1933 (“Securities Act”), Section 9(a)(2) of the Securities Exchange 

Act of 1934 (“Exchange Act”) and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) 

thereunder. 

6. The Commission seeks a permanent injunction against Stubos, enjoining him 

from engaging in the transactions, acts, practices, and courses of business alleged in this 

Complaint; disgorgement of all ill-gotten gains from the unlawful conduct set forth in this 

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3 
 

Complaint, together with prejudgment interest pursuant to Section 21(d) of the Exchange Act; an 

order barring Stubos from participating in any offering of a penny stock, pursuant to Section 

20(g) of the Securities Act and/or Section 21(d) of the Exchange Act; and a conduct-based 

injunction enjoining Stubos from directly or indirectly, including but not limited to, through an 

entity owned or controlled by him, participating in the issuance, purchase, offer, or sale of any 

security; provided, however, that such injunction shall not prevent Stubos from purchasing or 

selling securities listed on a national securities exchange for his own personal account; and such 

other relief as the Court may deem appropriate. 

7. The Commission also seeks relief against Dori-Ann Stubos (the “Relief 

Defendant”) who received proceeds of the Defendant’s unlawful acts, practices and schemes and 

should not be entitled to retain those illegally-derived proceeds. 

8. The Commission seeks a temporary restraining order and a preliminary injunction 

to freeze assets held by the Defendant and the Relief Defendant and to preserve those assets 

necessary to satisfy an eventual judgment against the Defendant.  The Commission will also seek 

a repatriation order to facilitate the prompt resolution of this matter on the merits. 

JURISDICTION AND VENUE 

9. This Court has jurisdiction over this action pursuant to Section 22(a) of the 

Securities Act [15 U.S.C. §77v(a)] and Sections 21(d), 21(e), and 27 of the Exchange Act [15 

U.S.C. §§78u(d), 78u(e), 78aa]. 

10. Venue lies in this Court pursuant to Section 22(a) of the Securities Act [15 U.S.C. 

§77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §78aa].  Certain of the acts, practices, 

transactions and courses of business alleged in this Complaint occurred within the Southern 

District of New York, and were effected, directly or indirectly, by making use of means or 

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4 
 

instrumentalities of transportation or communication in interstate commerce, or the mails.  For 

example, during the Relevant Period, certain individuals who reside in the Southern District of 

New York purchased the stock of Petrosonic and Ener-Core. 

DEFENDANT 

11. George Stubos, age 55, is a Canadian citizen and a resident of Vancouver, 

Canada.  On June 28, 2007, the British Columbia Securities Commission (“BCSC”) barred 

Stubos from participation in the securities industry and from acting as a director or officer of any 

issuer for a period of two years, because he traded in the stock of an issuer where he was a 

director and insider and failed to file insider reports required under Canadian law.  The BCSC 

also barred Stubos, an investment adviser at the time, from participating in any investor relations 

activities for two years.  On September 3, 1998, the Vancouver Stock Exchange (“Exchange”) 

barred Stubos from the Exchange for one year followed by one year of supervision upon return 

to the industry and ordered him to pay fines and disgorgement for executing trades in a client 

account without the client’s permission. 

RELIEF DEFENDANT 

12. Dori-Ann Stubos, age 55, is a Canadian citizen, a resident of Vancouver, Canada 

and the wife of George Stubos.  George Stubos transferred, directly or indirectly, at least $1.3 

million derived from his illicit stock sales for the purchase of a house in Palm Springs, California 

in the name of Dori-Ann Stubos. 

RELATED INDIVIDUALS AND ENTITIES 

13. Morrie N. Tobin, age 57, is a Canadian citizen and was a resident of Los Angeles, 

California.  On February 27, 2019, Tobin pled guilty to charges of conspiracy to commit 

securities fraud and aiding and abetting securities fraud.  See U.S. v. Tobin, 18-CR-10444 (D. 

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5 
 

Mass.).  The Commission filed an action against Tobin on November 27, 2018, and on April 16, 

2021, the District Court entered final judgment against Tobin enjoining him from future 

violations of the registration provisions of the Securities Act and the antifraud provisions of the 

Securities Act and the Exchange Act and imposing a penny stock bar.  See SEC v. Tobin et al., 

No. 18-CV-12451 (D. Mass.). 

14. Petrosonic Energy Inc. (“Petrosonic”) was a Nevada corporation with its principal 

place of business in Los Angeles, California, and during the Relevant Period, it was purportedly 

in the business of petroleum refining.  During the Relevant Period, Petrosonic’s common stock 

was registered with the Commission under Section 12(g) of the Exchange Act.  The Commission 

suspended trading in the securities of Petrosonic on September 20, 2018 because Petrosonic had 

failed to file required periodic reports with the Commission since September 30, 2016.  On 

August 22, 2019, the Commission revoked the registration of its shares.  During the Relevant 

Period, Petrosonic’s securities were quoted on OTC Link, operated by OTC Markets Group, Inc., 

under the symbol “PSON,” and Petrosonic filed periodic reports with the Commission pursuant 

to Section 13(a) of the Exchange Act and the rules thereunder.  

15. Ener-Core, Inc., (“Ener-Core”) is a Delaware corporation with its principal place 

of business in Laguna Niguel, California, and during the Relevant Period, it purportedly designed 

and manufactured systems producing continuous energy.  Ener-Core’s common stock was 

registered with the Commission under Section 12(g) of the Exchange Act in 2015.  During the 

Relevant Period, Ener-Core’s securities were quoted on OTC Link under the symbol “ENCR.” 

BACKGROUND AND DEFINITIONS 

16. Before selling stock, persons who control the stock of public companies (“control 

persons”) are required to: (a) register such sales with the Commission pursuant to Section 5 of 

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6 
 

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.  In 

addition, for public companies whose securities are registered under Section 12 of the Exchange 

Act, investors owning 5% or more of such company’s stock are required publicly to disclose 

their ownership interest, while investors owning 10% or more of such company’s stock are 

required publicly to disclose all of their trading in that stock, regardless of quantity.  Such 

registration requirements, sale restrictions, and disclosure obligations are safeguards designed to 

protect the market for purchases and sales of stock, to inform investors about the nature of the 

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

17. 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 (i.e., a control person).  “Control” means the power to direct management and policies of 

the company in question.  Typically, affiliates include officers, directors and controlling 

shareholders but any person who is under “common control” with or has common control of an 

issuer is also an affiliate.  

18. The Over-the-Counter (“OTC”) Markets is a stock quotation service based in 

New York 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).  

Public companies that do not have an obligation to file reports with the Commission may, 

nonetheless, choose to file public reports (such as quarterly and annual statements) on the OTC 

Markets website for investors to review and consider when making investment decisions. 

19. “Penny Stock,” as used herein, generally refers to a security issued by a very 

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7 
 

small company that trades at less than $5 per share.  During the Relevant Period, both Petrosonic 

and Ener-Core were penny stocks.  

20. “Restricted stock” includes stock of a publicly traded company (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 operation, risk factors, and management.  It also 

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

securities.   

21. “Unrestricted stock” is stock that may legally be offered and sold in the public 

securities marketplace by a non-affiliate, ordinarily having previously been subject to a 

registration statement.  Registration statements are transaction specific, 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.  When a control person 

buys publicly traded or otherwise unrestricted shares in a company that s/he controls, those 

shares automatically become subject to the legal restrictions on sales by an affiliate. Such legal 

restrictions include strict limits on 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. 

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8 
 

22. “Float” is the amount of unrestricted shares on deposit with broker-dealers and 

available for trading in the public market. 

23. A “transfer agent” is a company which, 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. 

The Sharp Group 

24. Stubos utilized the illicit services of Frederick L. Sharp and his employees (“the 

Sharp Group”) to facilitate each step of his fraud.  The Sharp Group’s operators were sued by the 

Commission for violating the securities laws.  See SEC v. Sharp, et. al., No. 1:21-cv-11276-

WGY (D. Mass. filed Aug. 5, 2021).  Sharp and one of his employees, Courtney Kelln, were also 

charged criminally by the United States Department of Justice.  See U.S. v. Sharp, et. al., 1:21-

mj-07182-JCB (D. Mass filed Aug. 4, 2021). 

25. From at least 2010 and continuing after the Relevant Period, the Sharp Group was 

in the business of facilitating illegal stock sales in the public securities markets.  The Sharp 

Group provided a variety of services to help its clients (including Stubos), who were public 

company control persons, conceal their identities when selling the stock of companies they 

controlled.  By utilizing the Sharp Group’s services to disguise his identity and his controlling 

positions, Stubos fraudulently concealed the fact that he, a public company control person, was 

selling large blocks of stock to unsuspecting investors. 

26. The Sharp Group deliberately concealed the identities of its clients through the 

array of services it offered, including: forming and providing offshore nominee companies that 

held shares for undisclosed control persons; arranging for clients to deposit stock in offshore 

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9 
 

trading platforms to obfuscate the control persons’ association with their public company penny 

stock; and providing and administering an encrypted communication network by purchasing, 

configuring and delivering devices which the Sharp Group referred to as “xPhones.”  The 

xPhones could only be used for communications on the Sharp Group’s encrypted 

communications network, and xPhone users communicated using code-names and numbers.  As 

detailed below, Stubos utilized all the foregoing Sharp Group services in carrying out his 

fraudulent scheme. 

27. The Sharp Group also provided additional services to its clients to further the 

clients’ fraudulent schemes such as: administering a proprietary accounting system, referred to as 

“Q,” that tracked a client’s total stock holdings and sales across various nominee shareholders 

and trading platforms; paying out the proceeds of illegal stock sales at clients’ direction to 

accounts around the world and/or to clients’ internal accounts with the Sharp Group; arranging to 

route such payments by circuitous methods designed to conceal the source of funds; and 

fabricating documents, such as invoices, to conceal the nature and source of the payments.  

Stubos also utilized these additional Sharp Group services in carrying out his fraudulent scheme.  

Stubos’ codenames on xPhone messages and in the Q accounting system were “Lion” and “77.” 

DEFENDANT’S PETROSONIC FRAUD 

28. Stubos became a Sharp client in 2012.  Shortly after becoming a client, Stubos 

began transferring his controlling position in Petrosonic to the Sharp Group.  In late March and 

early April 2012, the Sharp Group received two deposits of purportedly unrestricted shares of 

Petrosonic, totaling approximately 2.6 million shares, into Stubos’ Q account.  One month later, 

Petrosonic underwent an 11.25-for-1 forward stock split resulting in Stubos holding 29.6 million 

purportedly unrestricted shares of Petrosonic with the Sharp Group.  Later that year, Stubos 

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10 
 

transferred an additional 14.6 million restricted shares of Petrosonic to the Sharp Group.  As of 

December 31, 2012, Petrosonic had 70.3 million shares outstanding, and Stubos, through the 

Sharp Group, held 56% of its outstanding shares.  Therefore, Stubos was an affiliate of 

Petrosonic. 

29. The Sharp Group supplied various nominee companies to hold Stubos’ penny 

stock.  Stubos caused the Sharp Group to strategically split the stock into blocks of stock of less 

than 5% of the total outstanding stock to be held in the name of each nominee company.  As 

discussed above, breaking the shares into blocks of less than 5% ownership was done to avoid 

reporting requirements and restrictions and scrutiny by brokerage firms and other market 

participants like transfer agents.   

30. In February 2013, Stubos demonstrated his knowledge of the 5% ownership 

reporting requirement in an encrypted xPhone message exchange with Sharp.  In that exchange, 

Sharp suggested moving 6.6 million purportedly free-trading shares but wanted to make sure that 

the stock is held in two positions, so that each position would be under 5% of the total 

outstanding stock, to avoid scrutiny from brokers and others.  Stubos responded, “Ok, sounds 

like a plan…the restricted [shares] should be registered in 4 new shareholders, with 2 of them 

having 3.5 [million shares]…”  When Sharp questioned Stubos stating that 3.5 million shares is 

more than 5%, Stubos corrected him and explained that 3.5 million shares are less than 5%, 

because “…having closed 12 million shares at .25 we now have 65m + 12m outstanding so 77 

million shares out[standing].”   

31. Beginning in April 2012, the Sharp Group began depositing Stubos’ Petrosonic 

shares into various Sharp Group-administered nominee companies’ overseas brokerage accounts.  

By December 31, 2012, Stubos, using the Sharp Group’s services, accounted for approximately 

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11 
 

98% of all Petrosonic stock deposits which had been made with any brokers in the world (the 

“float”).  These purportedly unrestricted shares held by the Sharp Group’s nominee companies 

should have been restricted because Stubos retained control and ownership of those shares. 

Misleading Stock Promotion 

32. From 2012 through 2014, Stubos secretly funded multiple stock promotions of 

Petrosonic to create interest in the stock among investors, increase demand for the stock, and 

thus, drive up Petrosonic’s stock price and trading volume.  Stubos hid his involvement in 

funding stock promotions in various ways.  First, as evidenced by Q accounting records, Stubos 

used the Sharp Group to make payments to various stock promoters, thus concealing his role in 

funding the promotions.  Second, he funneled Sharp Group proceeds to a Washington state 

corporation that he controlled to pay U.S. promoters, including many of the same promoters he 

paid via the Sharp Group.  These promotions were misleading because they did not disclose that 

Stubos, the largest stockholder and an affiliate, was funding the promotions that encouraged 

potential investors to buy the stock at a time when he would be selling the stock.  Third, Stubos 

used a foreign entity created by the Sharp Group (the “Belize Nominee”) to hire stock promoters. 

33. In June 2013, Stubos asked Sharp to create a nominee entity for Stubos to use to 

hire stock promoters, adding yet another layer of disguise between Stubos and the stock 

promotions.  Sharp set up the Belize Nominee in Belize on behalf of Stubos.  In an encrypted 

xPhone message, Stubos asked Sharp to create an email account for the Belize Nominee so 

Stubos could contact promoters without having discoverable communications linked to himself: 

“I will need to be able to interact through this email, supposedly from ‘them.’”  Q accounting 

records show that Sharp charged Stubos $2,900 for the cost to incorporate the Belize Nominee 

on June 7, 2013.  After Sharp incorporated the Belize Nominee, Stubos used it to hire stock 

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12 
 

promoters.  Petrosonic promotions contained misleading fine print stating that the Belize 

Nominee, not Stubos (an affiliate of Petrosonic), had paid for the promotions and related 

marketing materials. 

34. From June 2012 through October 2014, Stubos directed at least $3.3 million in 

payments to various promoters from his illicit Petrosonic trading proceeds using the methods 

described above.  Stubos paid for promotions of Petrosonic without disclosing in those 

promotions that he was an affiliate of the issuer.  The promotions were thus misleading.  As the 

price and trading volume of Petrosonic stock began to rise in response to each of those 

promotions, Stubos began selling his shares into the market via the Sharp Group-administered 

nominee companies.  This pattern of misleading promotions, followed by Stubos sales to profit 

on those promotions, was repeated several times.  From June 2012 through April 2015, Stubos 

sold over 23 million shares of Petrosonic using the Sharp Group, generating approximately $18.5 

million in net trading proceeds.  The graph below illustrates a series of increases in trading 

volume and price that occurred from June 2012 through October 2014 as a result of Stubos’ 

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13 
 

conduct: 

 

Partnership with Tobin 

35. In 2013, Stubos partnered with Morrie Tobin in the Petrosonic scheme.  Tobin 

agreed to raise money for Petrosonic from private investors.  These private investors provided an 

influx of $3 million to Petrosonic, after which Stubos’ promotional efforts and corresponding 

stock sales increased substantially.  Stubos paid Tobin approximately $3.4 million dollars 

generated from Petrosonic trading proceeds in exchange for Tobin’s services related to the 

private investments. 

Stubos Manipulated Petrosonic’s Stock Price 

36. While Stubos was selling millions of Petrosonic shares through the Sharp Group 

during the promotions he funded, he also directed manipulative trading to drive up the price and 

liquidity of the stock he was trying to sell.  This manipulative activity was designed to deceive 

investors about the existence of an active market in Petrosonic stock.  Specifically, Stubos 

directed Sharp Group traders via encrypted messages strategically to buy Petrosonic stock on 

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numerous occasions in order to support and/or inflate its price.  For example, on September 9, 

2013, Stubos directed a Sharp Group trader to stop selling Petrosonic stock and switch to buying 

the stock instead: “[W]e should step away from the offers and put some support at the previous 

low [price.]”  Sharp Group records show that on September 9, Stubos purchased 13,000 shares 

and sold 72,117 shares.  The buy orders and sell orders were placed from different Sharp Group 

nominees’ brokerage accounts in different countries so that they would not appear linked.  By 

purchasing small amounts of Petrosonic stock, Stubos was able to increase or maintain its price.  

Later, Stubos was able to capitalize on the manipulated price and continue to sell.   

37. Stubos was a control person of Petrosonic, because he owned more than 50% of 

its outstanding stock.  Therefore, he was required to disclose his holdings on filings with the 

Commission.  Stubos was also required to disclose all of his trading of Petrosonic stock and was 

subject to limitations on the amount of Petrosonic stock he could sell.  During the Relevant 

Period, Stubos never disclosed his control over Petrosonic stock and never registered any of his 

sales of his Petrosonic shares with the Commission as required under the securities laws. 

DEFENDANT’S ENER-CORE FRAUD 

38. From 2013 through 2014, Stubos engaged in a fraudulent scheme to sell the 

securities of a second issuer, Ener-Core.  In April 2013, Stubos acquired the public shell 

company which would later become Ener-Core from another Sharp Group client for $325,000.  

A shell company is a company that has little to no business operations and/or non-cash assets for 

an extended period of time.  

39. By acquiring the Ener-Core shell, Stubos gained control of its outstanding stock.  

Following the purchase, Sharp Group accounting records show Stubos’ account received 

virtually all the purportedly unrestricted and restricted shares of Ener-Core that had been issued 

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by the company.  As of June 2013, Stubos controlled 99.7% of Ener-Core’s purportedly 

unrestricted stock.   

40. Beginning in May 2013, for the benefit of Stubos, the Sharp Group transferred his 

Ener-Core shares to the nominee companies it supplied,  strategically split those shares into 

blocks of stock of less than 5% of the total outstanding stock for each nominee shareholder, and 

then deposited those shares with brokerage firms in order to be ready for market sale.  From 

November 2013 through October 2014, Stubos directed at least $1.1 million in payments to stock 

promoters, including many of the same promoters he used to promote Petrosonic.  Like 

Petrosonic, Ener-Core promotional newsletters’ fine print misleadingly stated that the Belize 

Nominee was the paying party for the promotion.  Similar to the Petrosonic scheme, Stubos 

continued to direct all trading in Ener-Core using the Sharp Group and sold the stock during each 

promotional campaign that he orchestrated in order to profit from the demand he had created.  

From June 2013 through October 2014, Stubos dumped 9.4 million shares of Ener-Core into the 

market, generating $2.9 million in net trading proceeds. 

Manipulative Trading 

41. Before Stubos began aggressively selling Ener-Core shares into the market, he 

engaged in manipulative trading to inflate the price of Ener-Core stock and to give a false 

appearance of active trading in the market.  For example, from August 23 through September 3, 

2013, there was no trading in Ener-Core stock.  In order to reflect trading activity in the stock, 

Stubos directed a Sharp Group trader via encrypted messages to start buying and selling the 

stock on his behalf.  On September 3, Stubos wrote an encrypted xPhone message with the 

subject, ENCR: “We want to show a little bit of activity here on this one.  Nothing big but 15-

20k a day between 1.30 to 1.50 if you can manage so it looks natural…Almost a coincidence.”   

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42. Nearly every day from September 5 through September 27, the Sharp Group 

trader bought and sold Ener-Core stock in amounts ranging from approximately 8,000 to 15,000 

shares.  The purchases and sales were made through different overseas brokerage accounts held 

in the names of different nominee companies to give the appearance that different shareholders 

were trading the stock.  On many of the trading days, the buy and sell quantities matched exactly.  

The chart below shows examples of Stubos’ trading over that period of time compared to the 

total market trading volume and the daily closing price.   

 

43. Stubos was explicit in his encrypted messages with Sharp Group personnel about 

the purpose of the trading he was directing: to give the appearance to unsuspecting investors that 

Ener-Core was actively trading at increasing prices.  On September 25, 2013, Stubos wrote to a 

Sharp Group trader, “Keep…on painting that tape [on] encr.”  “Painting the tape” colloquially 

refers to a deceptive trading device that may involve buying and selling a security, for the 

purpose of creating the appearance of active trading in order to increase interest in that stock.   

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44. Stubos’ efforts were successful.  The chart below reflects Ener-Core’s price and 

trading volume for August 2013 (the month before Stubos started the manipulative trading) and 

September 2013 (when Stubos was on both sides of trading for the vast majority of the trading 

days during the month). 

 

45. Over the next several months, Stubos continued to direct the buying and selling of 

Ener-Core shares in Sharp Group-administered overseas brokerage accounts.  The records from 

the Q accounting system show that the buy orders and sell orders for these trades were placed 

through different Sharp Group nominees’ brokerage accounts in different countries so they 

would not appear to be connected.   From September 5, 2013 through December 31, 2013, 

Stubos was on both sides of Ener-Core trading for 54 of the 72 possible trading days.  

PROFITS AND TRANSFERS TO RELIEF DEFENDANT 

46. As discussed above, from June 2012 through April 2015, Stubos sold over 23 

million shares of Petrosonic using the Sharp Group, generating approximately $18.5 million in 

 -

 2,000

 4,000

 6,000

 8,000

 10,000

 12,000

 14,000

 16,000

 18,000

 20,000

 $0.90

 $1.00

 $1.10

 $1.20

 $1.30

 $1.40

 $1.50

 $1.60

ENCR - Price and Volume (Aug - Sept 2013)

Volume Close

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net trading proceeds. Q accounting records show that after costs including promotions and the 

distributions to Tobin, Stubos’ Q account (the “LION Account") received approximately $10 

million in net profits derived from Petrosonic trading. 

47. Likewise, from June 2013 through October 2014, Stubos dumped 9.4 million 

shares of Ener-Core into the market, generating $2.9 million in net trading proceeds.  Q 

accounting records show that approximately $930,000 of those proceeds were transferred to the 

LION Account.   

48. Stubos then used the LION Account for his personal benefit, including directing 

over CAD $1.5 million in payments to himself and the venture capital firm he owned.  The Lion 

Account also show Stubos receiving over CAD $1.9 million in cash and gold coins.  Lastly, 

Stubos directed the Sharp Group to wire approximately $3.6 million from his illicit trading 

proceeds to an account he controlled at a Panamanian broker-dealer firm (the “Panamanian 

Account”).   

49. The xPhone messages show Stubos directing Sharp Group employees to issue 

various wires from his LION Account to the Panamanian Account.  In particular, Stubos, directly 

or indirectly, transferred $553,500 to the Panamanian Account on or about July 18, 2013 and 

$1,252,000 on or about January 10, 2014.  In total, Q accounting records show Stubos directed 

over $3.6 million of proceeds directed from the Sharp Group to the Panamanian Account. 

50. In May 2014, wires for approximately $1.3 million were sent from the broker-

dealer holding the Panamanian Account to a title company in California to purchase a property in 

Palm Springs, California in the name of Dori-Ann Stubos, George Stubos’ wife.  Through this 

transfer, Stubos gave his illicit sale proceeds to Dori-Ann Stubos for no legitimate purpose or 

consideration. 

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ADDITIONAL ISSUERS’ PENNY STOCK SOLD BY STUBOS 

51. In addition to the stock of Petrosonic and Ener-Core, Stubos’ scheme involved 

utilizing the Sharp Group to control and sell the penny stock of other Issuers.  For example, 

during 2013, Stubos, directly or indirectly, transferred purportedly unrestricted stock of Homie 

Recipes, Inc. (“Homie”) to the Sharp Group.  The stock was divided and distributed to Sharp 

Group-administered nominee companies in blocks of less than 5% of the company’s outstanding 

stock.  In December 2015, Stubos expressed displeasure to Sharp about the amount it was 

costing him to maintain Homie and its stock in Sharp’s custody and Sharp suggested that Stubos 

might be able to sell the Homie shell company to another of his clients.  Stubos responded that 

he would be “happy” to sell.  In August 2017, according to the Q system, Sharp managed the 

sale of Homie and its stock to another one of his clients.  Stubos received a payment of $260,000 

for the shell.  The Sharp client who bought the Homie shell changed its name and then sold its 

stock in connection with his own promotional activities.  

52. Stubos also appears to be involved, at least in part, with a similar scheme 

involving a fourth issuer, Synergy CHC Corp (“Synergy”).  Through various encrypted xPhone 

messages concerning Synergy, Stubos revealed his understanding of the illegal nature of his 

actions and his fear of being discovered.  For example, on September 16, 2014, Stubos messaged 

Kelln, a Sharp Group employee responsible for dividing and distributing stock to Sharp Group 

nominee companies: 

From: Celt (Kelln) 
To:  77 (Stubos) 
Subject: Just a thought 
 
The shares are register to S1 holders.  We can lift their signatures and use  
their shares to vote instead of transferring them all to nominees.  Up to you. 
 
From: Lion (Stubos) 

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To: Celt (Kelln) 
Subject: Re: Just a thought 

 
Ok do it that way.  Easy.  Let’s not talk on the phone anymore.  Really scares  
the shit out of me….Sorry to be blunt, but shit is scary out there and they are  
listening, who knows?  Paranoid is good. 

 
53. In another encrypted xPhone message, Stubos directed Kelln to provide votes for 

a Synergy stockholder meeting on September 24, 2014, demonstrating his control over the 

nominee companies that were the shareholders on paper.  On September 17, 2014, Stubos 

messaged Kelln “vote all that we can for the resolutions with management.”  Kelln asked if he 

needed names and he responded “No I just need the votes.”  On September 22, 2014, Stubos 

again messaged Kelln about whether she could facilitate online voting instead of paper voting. 

When she questioned how the process worked, Stubos responded, “I don’t f’n know? And my 

moron partner just emailed the whole fucking thing to MY email.”  Stubos last email to Kelln 

demonstrates his concern that evidence of his fraudulent conduct would be traceable to him 

through his personal email.  

FIRST CLAIM FOR RELIEF 
FRAUD IN THE OFFER OR SALE OF SECURITIES 

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

54. Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if 

fully set forth herein. 

55. By reason of the conduct described above, Stubos, in 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.   

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56. By reason of the conduct described above, Stubos violated Sections 17(a)(1) and 

(3) of the Securities Act [15 U.S.C. §77q(a)(1) and (3)] and will continue to violate those 

sections unless restrained and enjoined. 

SECOND CLAIM FOR RELIEF 
FRAUD IN CONNECTION WITH THE PURCHASE OR SALE OF SECURITIES 

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

57. Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if 

fully set forth herein. 

58. By reason of the conduct described above, Stubos, 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. 

59. By reason of the conduct described above, Stubos violated, and unless restrained 

and enjoined will continue to violate, Section 10(b) of the Exchange Act [15 U.S.C. §78j(b)] and 

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

THIRD CLAIM FOR RELIEF 
MARKET MANIPULATION 

(Violations of Section 9(a)(2) of the Exchange Act by Stubos) 
 

60.  Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if 

fully set forth herein. 

61. By reason of the conduct described above, Stubos effected, alone or with one or 

more other persons, a series of transactions in at least one security that was not a government 

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security, that created actual or apparent active trading in that security, or raised or depressed the 

price of that security, for the purpose of inducing the purchase or sale of that security by others. 

62. By engaging in the conduct described above, Stubos violated, and unless 

restrained and enjoined will continue to violate, Section 9(a)(2) of the Exchange Act [15 U.S.C. 

§ 78i(a)(2)]. 

FOURTH CLAIM FOR RELIEF 
OTHER EQUITABLE RELIEF, INCLUDING UNJUST ENRICHMENT AND 

CONSTRUCTIVE TRUST 
(against Dori-Ann Stubos) 

 
63. Paragraphs 1 through 53 above are re-alleged and incorporated by reference as if 

fully set forth herein. 

64. 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.” 

65. Dori-Ann Stubos received investor funds derived from the unlawful acts, 

practices and scheme of George Stubos under circumstances dictating that, in equity and good 

conscience, she should not be allowed to retain such funds. 

66. Further, specific property acquired or improved by Dori-Ann Stubos is traceable 

to George Stubos’ wrongful acts, and there is no reason in equity why she should be entitled to 

retain that property. 

67. As a result, Dori-Ann Stubos is liable for unjust enrichment and should be 

required to return her 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 Dori-Ann Stubos that is 

traceable to George Stubos’ wrongful acts. 

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PRAYER FOR RELIEF 

WHEREFORE, the Commission respectfully requests that this Court enter a Judgement 

that: 

A. Permanently restrains and enjoins Stubos and his agents, servants, employees and 

attorneys, and those persons in active concert or participation with him who receive actual notice 

of the injunction by personal service or otherwise, from: 

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

violating 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], and violating Section 9(a) of the Exchange Act [15 

U.S.C. §78i(a)]; and 

2. directly or indirectly, including but not limited to, through any entity he 

owns or controls, participating in the issuance, purchase, offer, or sale of any security; 

provided, however, that such injunction shall not prevent him from purchasing or selling 

securities listed on a national securities exchange for his own personal account; 

B.  Bars Stubos 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 21(d) of the Exchange Act [15 

U.S.C. §78u(d)]; 

C. Orders Stubos to disgorge, with prejudgment interest, all ill-gotten gains obtained 

by reason of the unlawful conduct alleged in this Complaint pursuant to Section 21(d)(7) of the 

Exchange Act [15 U.S.C. §78u(d)(7)]; 

D. Orders Dori-Ann Stubos to disgorge, with prejudgment interest, all ill-gotten 

gains obtained by reason of the unlawful conduct alleged in the Complaint; 

F. Retains jurisdiction over this action to implement and carry out the terms of all 

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orders and decrees that may be entered; and  

G. Grants such other and further relief as this Court may deem just and proper. 

 

JURY DEMAND 

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

 

DATED:  June 6, 2022. 

     Respectfully submitted, 

                               _/s/ Nita K. Klunder _________________________ 
     Nita Klunder  
     Kathleen Burdette Shields* 
     Jennifer A. Cardello * 
     Amy Gwiazda * 

 
     SECURITIES AND EXCHANGE COMMISSION 
     Boston Regional Office 
     33 Arch St., 24th Floor 
     Boston, MA 02110 

Phone: 617-573-8904 (Shields), 617-573-4577 (Cardello),  
     Fax: 617-573-4590 
     [email protected]; [email protected] 
 

*Not admitted in the U.S. District Court for the Southern 
District of New York 

 
 

 

 

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