SEC v. JILLIAN SIDOTI, No. 5:20-cv-02178, Central District of California (Oct. 19, 2020) — Complaint

COMPLAINT

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REBECCA ISRAEL (N.Y. Bar No. 4783304)
(pro hac vice application pending)
Email: [email protected]
KATHLEEN SHIELDS (Mass. Bar No. 637438)
(pro hac vice application pending)
Email: [email protected]
Securities and Exchange Commission
33 Arch Street, 24
th
 Floor
Boston, MA 02110
(617) 573-4582 (Israel Direct)
(617) 573-8904 (Shields Direct)
Facsimile: (617) 573-4590

Local Counsel
AMY J. LONGO (Cal. Bar No. 198304)
Email: [email protected]
Securities and Exchange Commission
444 S. Flower Street, Suite 900
Los Angeles, CA 90071
(323) 965-3835 (Longo Direct)
Facsimile: (213) 443-1904
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

vs.
JILLIAN SIDOTI,
Defendant.

    Case    No.

COMPLAINT

DEMAND FOR JURY TRIAL

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Plaintiff Securities and Exchange Commission (“SEC”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to Sections 20(b),
20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§
77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the
Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78u(d)(1),
78u(d)(3)(A), 78u(e) & 78aa(a).
2. Defendant has, directly or indirectly, made use of the means or
instrumentalities of interstate commerce, or of the mails, in connection with the
transactions, acts, practices and courses of business alleged in this complaint.
3. Venue is proper in this district pursuant to Section 22(a) of the Securities
Act, 15 U.S.C. § 77v(a), and Section 27(a) of the Exchange Act, 15 U.S.C. § 78aa(a).
because certain of the transactions, acts, practices and courses of conduct constituting
violations of the federal securities laws occurred within this district.  In addition,
venue is proper in this district because at all relevant times, Defendant Sidoti
maintained a law office in this district and also resides in this district.
SUMMARY
4. This is a securities fraud enforcement action. Sidoti, a licensed attorney,
engaged in fraud in the course of shepherding a public shell company from inception
to public trading. That company was Blake Insomnia Therapeutics, Inc. (“Blake” or
“the Company”). Sidoti provided legal advice and services related to Blake from the
time of its inception in 2012 until approximately the middle of 2017.
5. In 2012, Sidoti helped to set up the Blake shell by drafting, signing, and
submitting to the Commission legal documents that contained materially false
information, and she did so despite knowing that the information was false.
Specifically, Sidoti knew that the founders of Blake had no intention of pursuing the
Company’s stated business plan, and she knew that the purported investors named in
the documents she filed had not actually invested any money; as Blake’s founders

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told Sidoti, they reimbursed those purported investors for their “purchases” of shares.
6. In 2013 and 2014, Sidoti arranged to sell the fraudulently constituted
Company and almost all of its shares to one or more individuals, who then
collectively controlled Blake (the “Control Group”). Sidoti helped the Control Group
conceal its collective control of Blake by dividing the Blake shares it purchased
among a network of foreign nominee entities that were controlled by the Control
Group.
7. In 2014 and 2015, Sidoti prepared legal opinion letters that: (1) falsely
described the initial registration of Blake stock and (2) included materially
misleading statements about the control of the Blake shares. This was an essential
step in positioning the Control Group to illegally dump its shares by selling them into
the market.
8. Sidoti’s false and materially misleading opinion letters enabled the
Control Group illegally to sell its shares by evading federal securities laws that: (1)
require such shares to be issued pursuant to a valid registration statement; (2) require
disclosure of truthful information about ownership and control of companies that sell
stock to the public; and (3) restrict the amounts of stock that may be sold by company
affiliates such as the Control Group. By concealing the Control Group’s illegal sales
of stock -- as affiliates -- Sidoti enabled the Control Group to disguise its sales of
stock as ordinary trading by ordinary investors. In reality, those sales were a
liquidation of shares by the Control Group.
9. In 2017, as the Control Group illegally sold shares of Blake into the
market during a promotional campaign, Sidoti continued to represent the Company
and responded to inquiries regarding the ownership of its shares being sold to the
public.
10. Sidoti’s conduct enabled the Control Group illegally to sell
approximately 7.2 million shares of Blake to the public.
11. As a result of the conduct alleged herein, Sidoti violated, and unless

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restrained and enjoined will continue to violate, Sections 5(a), 5(c), 17(a)(1), and
17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5
thereunder.
12. The Commission seeks a permanent injunction against Sidoti, enjoining
her from engaging in the transactions, acts, practices, and courses of business alleged
in this Complaint; civil penalties pursuant to Section 20(d) of the Securities Act [15
U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)]; an
order barring Sidoti from participating in any offering of a penny stock, pursuant to
Section 20(g) of the Securities Act [15 U.S.C. §77t(g)] and/or Section 21(d) of the
Exchange Act [15 U.S.C. §78u(d)]; a permanent injunction restraining Sidoti from
providing legal services in connection with the offer or sale of certain securities; and
such other relief as the Court may deem appropriate.
DEFENDANT
13. Jillian Sidoti, age 42, resides in Winchester, California. Sidoti is a
partner at the law firm of Trowbridge & Sidoti LLP (also known as
“Crowdfundinglawyers.net”), which is based in Murrieta, California.
RELATED ENTITY
14. Blake Insomnia Therapeutics, Inc. (“Blake”) is a Nevada corporation
that purportedly has a principal place of business in New York, New York. Blake was
originally incorporated in Nevada in August 2012 as Book It Local Inc. Blake
changed its name to BioHemp International, Inc. in June 2019. The Commission
suspended trading in Blake stock (Ticker: BKIT) for 10 days effective July 26, 2019.
THE ALLEGATIONS
A. Background and Terminology
15. Persons who control companies which have stock that is sold to the
public are subject to a variety of legal and regulatory requirements. Such persons are
called “affiliates” and the public companies are called “issuers.” An “affiliate” of an
issuer is a person or entity that, directly or indirectly through one or more

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intermediaries, controls, is controlled by, or is under common control with, such
issuer. “Control” means the power to direct management and policies of the company
in question. Affiliates include officers, directors and controlling shareholders, as well
as any person who is under “common control” with, or has common control of, an
issuer. As used herein, the term “Control Group” means a group that collectively is an
“affiliate” of an issuer.
16. Before selling stock, affiliates are required to: (1) register the stock with
the Commission pursuant to Section 5 of the Securities Act [15 U.S.C. §77e]; (2) sell
the stock pursuant to an applicable exemption from registration; or (3) sell the stock
pursuant to the conditions set forth in SEC Rule 144 [17 C.F.R. §240.144], which
include limitations on the amount of stock an affiliate can legally sell.
17. Investors in certain public companies that, like Blake, have equity
securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. §781],
are required publicly to disclose any ownership interest in excess of 5% of the
company’s publicly traded stock. Such registration requirements, sale restrictions,
and disclosure obligations are critical safeguards designed to inform investors about
the nature of the stock they are holding or considering buying, and from whom they
would be buying that stock.
18. “Restricted stock” includes stock of a company whose shares are

publicly traded (also known as an “issuer”) that has been acquired from an issuer, or
an affiliate of the 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. A
registration statement is also required to disclose any person or group who is the

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beneficial owner of more than 5% of the company’s securities.
19. “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,
however, and apply to each separate offer and sale as detailed in the registration
statement. Registration, therefore, does not attach to the security itself, and
registration at one stage for one party does not necessarily suffice to register
subsequent offers and sales by the same or different parties. Thus, when an affiliate
buys publicly-traded or otherwise unrestricted shares in a company s/he controls,
those shares automatically become subject to the legal restrictions on sales by an
affiliate, which strictly limit the quantity of shares that may be sold in the public
markets absent registration. Without registration, affiliates are prohibited from selling
large quantities of an issuer’s shares, regardless of how the affiliates obtained those
shares.
20. The term “float,” as used herein, refers to an issuer’s purportedly
unrestricted stock that is available for trading. Sidoti and the Control Group’s
representatives sometimes referred to Blake’s purportedly unrestricted shares or float
as “free-trading” shares.
21. 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.
22. The Depository Trust Corporation (“DTC”) is a central securities
depository that serves as a custodian of securities. DTC performs the electronic
exchange for securities on behalf of buyers and sellers and settles the vast majority of
securities transactions in the United States. If an issuer’s securities are deemed “DTC
eligible,” DTC will hold an inventory of eligible shares on deposit. DTC defines an

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eligible security as “one that is freely tradeable pursuant to U.S. securities laws and is
otherwise qualified to be held at DTC and serviced.”
23. A “shell company” is a legal entity that lacks meaningful assets or
business operations. In a scheme to profit from such companies without actually
commencing business operations, individuals sometimes file materially false
registration statements and other filings to make company shares appear to be eligible
for public trading and quotation. Such “clean” shells, as they are called, may be sold
for substantial sums.
B. Sidoti Schemed to Set Up Several Sham Shell Companies with Two Other
Individuals
24. In June 2012, Sidoti had a phone call with Individuals A and B.
Individual A was a longtime client of Sidoti’s and Individual B was Individual A’s
business partner. They discussed a scheme involving the creation and sale of six shell
companies. One of those shell companies became Blake.
25. Individuals A and B told Sidoti that: (1) they intended to start two shell
companies per week for the next three weeks; (2) they had not yet decided what they
were going to name the six companies;

(3) they did not yet have ideas for the
purported business purposes for at least four of the six proposed companies; and (4)
they had not yet decided whom they would appoint as the purported officers for any
of the companies.
26. On the same phone call, Individuals A and B explained to Sidoti that, in
sum and in substance, none of the companies’ shareholders would be bona fide
investors, but that they intended to structure each company to look like it had 35
unaffiliated shareholders who had actually invested their own money. To create this
appearance of multiple, independent investors, Individuals A and B intended to ask
friends and acquaintances to sign investment paperwork, while Individuals A and B
would give the purported investors the money to pay for their purported investments.
Specifically, Individual A told Sidoti that he would ask each of the purported

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investors to write a check to purchase shares in the company, and that he would give
them each approximately $300 in cash as reimbursement. Individual A told Sidoti
that he already had an account containing $65,000 that would fund the $10,800 in
purported investments for each of the six companies, and that they would soon
provide her with the shareholder names to list in the registration statements Sidoti had
agreed to prepare for each company.
27. As discussed on the phone call, Individuals A and B planned to ask
acquaintances to pose as officers of each company in Commission filings, which
require the names of a company’s officers to be listed. Sidoti thus knew that
Individuals A and B would not appear, on paper, to have control over the companies,
but that Individuals A and B planned to, and did, exercise actual control over the
companies, including Blake.
28. Individuals A and B made clear to Sidoti that the purpose of creating the
companies was to create clean shell companies and to sell them to shell buyers. Thus,
Sidoti knew that Individuals A and B (along with the purported officers they would
recruit) had no intention of setting up actual operations for any of the six companies
and had no intention to pursue the stated business for the companies. Consistent with
this understanding, Sidoti discussed potential sales of these shells with Individuals A
and B and advised them about variables that would make their shells more
“marketable.” In particular, Sidoti offered guidance about the number of shares to be
issued, and about arranging to keep a shell’s shares under common control so that all
of the shares could be transferred to a buyer – which Sidoti described as a “fully
deliverable” shell. During the same period, Sidoti had received emails about the
prices at which both shell and non-shell public companies had been sold to people
who wanted to gain access to the public securities markets. Sidoti told Individuals A
and B that she had recently seen offers for shell companies of $300,000 or more.
29. Sidoti and Individuals A and B discussed how Sidoti would profit from
her participation in the scheme. They agreed that she would be paid for her services

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in setting up the shells, that she would be paid additionally for acting as the broker in
the anticipated sale of the shells, and that she would also receive shares of stock in
the shell companies so she could profit when the shells were sold to buyers.
30. Sidoti and Individuals A and B created six companies, including Blake,
according to the plan described above.
C. Sidoti Executed the Scheme as to Blake
31. On August 11, 2012, Sidoti signed Articles of Incorporation to
incorporate Blake in Nevada. Blake was originally incorporated under the name Book
It Local, with a stock ticker “BKIT.”
32. In or about August 2012, Individual A recruited a friend to serve as a
figurehead CEO of Blake (“Figurehead CEO”). Individual A told Figurehead CEO
that he would have no actual responsibilities in regards to the Company. He explained
that Figurehead CEO’s name would simply be listed on forms, that Figurehead CEO
would have to sign some documents, and, once he was no longer needed, Figurehead
CEO would be instructed by Individual A to resign from his officer position.
Figurehead CEO signed Blake’s Form S-1 and documents relating to the issuance of
Blake shares.
33. In August 2012, Sidoti drafted a private placement memorandum
(“PPM”) for Blake. A PPM is a legal document typically provided to prospective
investors when selling securities in a business. A PPM commonly describes the
company selling the securities, the terms of the offering, and the risks of the
investment. The Blake PPM contained numerous statements that Sidoti knew were
false and materially misleading. For example, the PPM falsely stated that Figurehead
CEO had provided the business plan for Blake; that Figurehead CEO was working
with Sidoti to prepare an SEC registration statement; and that Figurehead CEO would
coordinate all business operations for Blake.
34. In actuality, Sidoti knew that Figurehead CEO did none of these things.
She knew that Individuals A and B were running and controlling Blake. Though

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neither Individual A nor B appeared, at least on paper, to have control over Blake,
when Sidoti sought Blake’s authorization to act, she routinely reached out to
Individuals A and B rather than to Figurehead CEO.
35. The PPM that Sidoti drafted described Blake as a “development stage
company” that intended to create an “online booking system” to help consumers find
and hire live entertainment for events. Sidoti falsely stated in the PPM that Blake had
already developed an online bidding system for entertainment booking and that the
Company would work to build up a database of musicians for events. In actuality,
based on her discussions with Individuals A and B, Sidoti had no reason to believe
that anyone had begun executing any such business plans, nor did she have reason to
believe that anyone intended to do so. Rather, as Sidoti had been told explicitly by
Individuals A and B, they created Blake, along with the other shell companies, for the
purpose of marketing it to a shell-buyer.
36. In or about August 2012, Individual A recruited 35 friends and
acquaintances to act as shareholders of Blake (the “Purported Shareholders”). Each of
the Purported Shareholders wrote checks in the amount of $285, an amount slightly
below the $300 figure that Individual A had previously mentioned to Sidoti. These
checks provided written evidence of the Purported Shareholders’ “investments” in
Blake. In turn, each of the Purported Shareholders was listed as receiving 28,500
shares of the company. Simultaneously, Individual A repaid each Purported
Shareholder a roughly equal sum in cash, as he had explained to Sidoti. This resulted
in Blake issuing, on paper, 997,500 shares to the 35 Purported Shareholders.
37. Also in August 2012, Blake issued approximately 9.6 million shares to
four other shareholders (the “Original Blake Affiliates”). Two of these shareholders
were companies owned or controlled by Individual A; each received about 4.5
million shares. The third of these shareholders was Blake’s Figurehead CEO, who
received approximately 211,000 shares. The fourth of these shareholders was
Winchester Investments, an entity controlled by Sidoti, which received approximately

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380,000 shares.
38. Though Sidoti controlled Winchester Investments, she named her
paralegal as the owner of record on the Winchester Investment incorporation
documents and account opening documents. The paralegal acted at Sidoti’s direction
with respect to all actions regarding Winchester Investments.
D. Sidoti Drafted and Filed a Fraudulent Form S-1 Registration Statement
for Blake
39. On September 19, 2012, Sidoti, on behalf of Blake, filed with the SEC a
Form S-1 registration statement for the approximately 10.6 million shares of Blake
that were purportedly distributed in August 2012. Sidoti drafted Blake’s Form S-1
registration statement, and she was paid $5,000 for her services relating to the Form
S-1. Collectively, the approximately 10.6 million shares subject to Blake’s September
2012 registration statement are referred to herein as the “S-1 Shares.”
40. A Form S-1, also known as a “registration statement,” is the initial
registration form required by the SEC for new securities. Registration statements are
an important source of information about a company for prospective investors. Form
S-1 requires companies to detail their current business model and planned use of
capital proceeds, and also requires disclosure of any material business dealings
between the company and its directors or outside counsel. Prospective investors often
rely on the information a company supplies in its Form S-1 to determine whether they
should invest in a stock. An issuer is liable for any material misrepresentations or
omissions in a Form S-1, as are professionals who prepare or certify any part of the
Form S-1, or who prepare or certify reports used in connection with the Form S-1.
41. Sidoti also signed a legal opinion letter, which she filed with Blake’s
Form S-1, representing that the shares of Blake were “validly issued, fully paid, and
non-assessable.” Sidoti knew, or recklessly disregarded, that at least some of the S-1
shares were not “validly issued” or “fully paid.” On the contrary, as Sidoti knew, the
Purported Shareholders listed as purchasers in the Form S-1 were not bona fide

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investors.
42. Sidoti also repeated in the Form S-1 several of the misstatements in the
PPM regarding the purpose of Blake and the involvement of Figurehead CEO and his
intentions to create an online entertainment booking system. Sidoti also provided
materially misleading information regarding her own interest in Blake. Specifically,
she falsely asserted in the Form S-1 that she had no “direct or indirect” interest in
Blake, even though she actually owned approximately 380,000 Blake shares through
Winchester Investments.
43. Blake’s S-1 registration statement was deemed effective by the
Commission on June 10, 2013. When a registration statement is deemed effective, a
company may legally sell the registered shares to the public.
E. Sidoti Brokered the Sale of the Blake Shell to a Control Group
44. In the fall of 2013, soon after completing the Form S-1 registration
process, Sidoti was directly involved in marketing and selling the Blake shell to a
buyer. Beginning at least by October of 2013, Sidoti began advertising the shell for
sale. Sidoti told potential buyers that she was looking to sell Blake for “$212,500 net
to the seller,” and that the shell was “100% deliverable” – meaning that the buyer
could purchase all of the company’s shares, including the ones nominally held by
independent shareholders.
45. In or about December 2013 and January 2014, Sidoti successfully
brokered the sale of all of the shares of Blake to one or more individuals acting in
concert (referred to herein as the “Control Group”).
46. Sidoti and representatives of the Control Group negotiated and agreed on
a purchase price of $275,000 for the Blake shell. On or about December 16, 2013,
Sidoti—who also acted as escrow agent for the transaction—received a single wire
transfer for approximately $275,000. The $275,000 represented the purchase price for
two separate stock purchase agreements drafted by Sidoti – one for $250,000 and one
for $25,000 – by which the Control Group acquired almost all of the original S-1

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shares of Blake – roughly 10.6 million shares. As the drafter of the agreements and
the broker of the sale, Sidoti knew, or recklessly disregarded, that the buyer of those
shares became an affiliate of Blake through the transaction, because it acquired well
over 10% of Blake’s issued and outstanding stock. Sidoti also knew, or recklessly
disregarded, that the Control Group’s shares legally constituted “restricted stock,”
based on, among other provisions of the securities laws, the restrictions on sales by
affiliates.
47. Before formally transferring any shares, Sidoti took a series of steps
designed to conceal the fact that a Control Group had purchased virtually all the
shares of Blake. She helped to orchestrate a new issuance of shares of Blake, to
increase the number of outstanding shares, and she helped to structure the Blake
transaction as multiple separate sales, splitting up the S-1 shares purchased by the
Control Group into smaller blocks of shares to be transferred among eight nominee
entities set up by the Control Group.
48. The goal of these steps was to ensure that the Control Group would
eventually be able to sell their Blake shares into the market as if they were
unrestricted shares. To accomplish this, the Control Group had to conceal the fact that
it, and the members of the group, were affiliates of Blake. Otherwise, transfer agents
and other market gatekeepers would be expected to limit or reject the Control
Group’s future attempts to sell significant amounts of stock into the marketplace.
49. Sidoti knew that selling stock into the public markets was the goal of
these machinations. Specifically, in December 2013, she wrote an email to the
Control Group’s representative explaining that the shares would have to be split up
into smaller blocks of shares in order for the transaction to “result in fully free
tradable stock.” She explained, “[y]ou would have to make sure it gets divided up
amongst many shareholders (so no one is holding more than 10% of the outstanding
stock).” In another email forwarded to Sidoti, a Control Group representative wrote,
regarding the issuance of the 21 million new shares, “the reason to do it in this order

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is to increase the I&O [issued and outstanding shares] prior to the assignment to keep
all the new shareholders below 5% and therefore ensuring all shares that are assigned
to the new holders remain free trading.”
50. Sidoti helped to orchestrate the steps described above. In or about
January of 2014, Blake issued 21 million new restricted shares. As noted, the purpose
of this issuance was to dilute the percentage of shares transferred to the Control
Group’s eight nominee entities. Sidoti was involved in preparing paperwork for the
issuance, communicating to Blake’s transfer agent about the issuance, and arranging
for Figurehead CEO to sign the documents for the new issuance.
51. This issuance of new restricted shares diluted the 10.6 million original S-
1 shares to 33.5% (as opposed to 99.9%) of the total issued and outstanding shares of
Blake. Then, as a second step, described below, those 10.6 million shares were
further split among the Control Group’s eight nominee entities so that each entity
would nominally hold less than 5% of the total issued and outstanding stock.
52. Consistent with Sidoti’s email noting that the shares should be divided
up among multiple shareholders, Sidoti drafted two stock purchase agreements that
called for the 10.6 million S-1 shares to be split between, and transferred to, the
Control Group’s eight offshore entities in roughly equal blocks (each equal to less
than 5% of the outstanding stock of Blake). By assisting with the new issuance that
diluted the stock, and by arranging to transfer the shares in a way that would create
the appearance that there were multiple independent purchasers, Sidoti fraudulently
concealed the Control Group’s affiliate status.
53. The two stock purchase agreements that Sidoti drafted provided that the
shares would be transferred and split up among the eight offshore nominees as
follows:
i. Shares held in the names of the 35 Purported Shareholders
(totaling 997,500 shares) listed on the Form S-1 were transferred to one offshore
nominee entity controlled by the Control Group. These shares did not bear restrictive

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legends (identifying the shares as restricted from resale) because the 35 Purported
Shareholders’ shares were purportedly registered for sale as part of the 2012 Form S-
1, and the Purported Shareholders appeared, on paper, not to be insiders or affiliates.
ii. Shares held in the names of the Original Blake Affiliates
(approximately 9.6 million shares) were transferred to seven other offshore nominee
companies controlled by the Control Group in blocks of just under 1.4 million shares
each. These shares bore restrictive legends.
54. Sidoti instructed Blake’s transfer agent to send all of the share
certificates in the names of the eight nominee entities to a single address.
55. Sidoti also arranged to sell nearly all the Blake shares she held in the
name of Winchester Investments to one of the foreign nominee entities for $60,000.
Sidoti used those proceeds for personal purposes.
56. In January of 2014, Blake announced in a public filing a change of
control and business purpose, including the installation of a new CEO. Sidoti agreed
to be counsel for Blake going forward.
F. Sidoti Positioned the Control Group to Sell Blake’s Shares to the Public by
Writing and Signing Materially Misleading Legal Opinion Letters
57. Once the Control Group had acquired Blake’s shares and held them in
the name of its eight nominee entities, Sidoti played a key role in getting the shares
ready for public sale. Sidoti authored and signed opinion letters that she knew, or was
reckless in not knowing, contained material misstatements. She sent these opinion
letters to a transfer agent and to a securities settlement provider, to induce them to
make Blake’s shares available for sale in the securities markets.
Transfer Agent Letters
58. On or about December 5, 2014, Sidoti drafted and sent at least two
opinion letters to Blake’s transfer agent. One letter opined on the stock purchase
agreement that conveyed the shares held by the 35 Purported Shareholders listed on
Blake’s Form S-1 registration statement to one of the Control Group’s foreign

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nominee entities. Another letter opined on the stock purchase agreement that
conveyed approximately 9.6 million shares, from the Original Blake Affiliates,
including Sidoti’s Winchester Investments. These shares had been conveyed to the
seven additional foreign nominees for the Control Group, with each nominee entity
receiving approximately 1.3 to 1.39 million shares.
59. In both letters, Sidoti falsely represented that “the Shares were registered
on an S-1 Registration Statement,” that they were validly issued, that they “will no
longer be restricted as affiliate shares,” and “may be issued free of restrictive legend.”
She concluded each letter by stating “I am of the opinion that the Shares are free-
trading and may [be] transferred free of a restrictive legend.”
60. In writing the December 5, 2014 opinion letters, Sidoti intended to
induce the transfer agent to remove the restrictive legends that would otherwise limit
the sales of stock by the Control Group.
61. At the time she signed the Opinion Letters, Sidoti knew, or was reckless
in not knowing, that (1) the Form S-1 registration statement, on which she purported
to rely, contained several material misstatements, and (2) the Control Group’s eight
nominee entities collectively owned well over 10% of Blake’s issued and outstanding
shares and owned almost 99% of Blake’s float – and therefore were affiliates of
Blake.
DTC Letter
62.  To further position the Control Group to dump Blake shares, Sidoti
signed and sent to DTC a November 17, 2015 opinion letter regarding Blake. Sidoti
provided the letter to DTC to support a determination by DTC that the Blake shares
were “eligible for DTC book-entry delivery, settlement and depository services.”
Depositing shares at DTC is the primary route through which sellers of securities can
trade with retail investors, and this was critical to enable the Control Group to sell its
shares of Blake to the public.
63. Sidoti stated in her DTC opinion letter:

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We have acted as securities counsel to Blake Insomnia
Therapeutics, Inc....in connection with the deposit at [DTC] of up
to 10,597,572 shares of Common Stock....We are providing this
opinion at the request of the Company to support a determination
by DTC that the Subject Securities are eligible for DTC book-
entry delivery, settlement and depository services as of the date
hereof....

The Subject Securities were originally issued and sold under an
effective S-1 registration statement filed on September 19, 2012
...

Based on the foregoing, we are of the opinion that: (a) the Subject
Securities are not “restricted securities” as defined in Rule
144(a)(3) under the Securities Act, and (b) the Subject Securities
are freely transferable without registration under the Securities
Act by a holder which is not an “affiliate” of the Company as
defined in Rule 144(a)(1) under the Securities Act and has not
been an “affiliate” within 90 days of such transfer.

64.  At the time she signed and submitted this opinion letter to DTC, Sidoti,
knew, or recklessly disregarded, that her letter contained false statements and/or was
materially misleading.
65. Sidoti’s representations regarding Blake’s Form S-1 were materially
misleading in that she knew the 35 Purported Shareholders listed in the Form S-1
were not bona fide investors and had not spent their own money to invest.
66. Sidoti’s representation that the subject securities “are not ‘restricted
securities,’” was materially misleading in that she knew, or recklessly disregarded,
that these shares were legally restricted from resale because the shares were owned by
affiliates of Blake – namely, the Control Group, who owned collectively
approximately 33% of Blake’s issued and outstanding stock and approximately 99%
of Blake’s float.
67. Sidoti had arranged for the Control Group’s purchase of the Blake shell
and all of its stock in 2014, and had helped the Control Group split up its shares

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among eight nominee entities.  Thus she knew, or recklessly disregarded, that those
shares were held by affiliates who were acting as a group for the purpose of
acquiring, holding, or disposing of Blake stock. Accordingly, the Control Group was
prohibited from selling any of that stock—as no registration statement for such sales
was in effect—unless it complied with the resale conditions of Securities Act Rule
144, which strictly limits the quantity of shares that any affiliate may sell.
68. Sidoti signed the materially misleading November 2015 opinion letter to
DTC in order to assist the Control Group in depositing its shares for public sale,
knowing or recklessly disregarding that she was assisting the Control Group in
evading the legal restrictions on public sales of shares owned by corporate affiliates.
As a result of Sidoti’s actions, the Control Group successfully deposited its Blake
shares for sale in the securities markets.
G. The Control Group Sold Blake’s Stock
69. In 2016 and 2017, the Control Group indirectly paid for a promotional
campaign that was designed to increase the price and trading volume of Blake’s
stock. From January 9, 2017, through May of 2017, the Control Group sold over 5.2
million shares of Blake stock in the public market, without a valid registration
statement, and without complying with Rule 144 or any other exemption. Ultimately
from all of its fraudulent Blake sales, the Control Group generated proceeds of at
least $7.2 million.
70. On January 26, 2017, Sidoti responded to a letter from OTC Markets
Group, Inc., which had inquired about the promotional activities concerning Blake.
Over-the-Counter (“OTC”) Markets, Inc. is a stock quotation service that facilitates
public trading of shares in public companies that are not otherwise listed on national
securities exchanges (like NASDAQ or the New York Stock Exchange). Blake was
traded on the OTC Markets subsidiary known as OTC Link. In the letter, Sidoti told
OTC Markets that Blake was not aware of any trading activity or promotional activity
and that Blake only had two insiders, neither of whom had any intention of selling

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their shares in the near future.
71. Shortly thereafter, Sidoti filed with the SEC a Form 8-K on Blake’s
behalf, listing Sidoti as counsel, stating that “neither the Company, nor its directors,
officers, or controlling shareholders, directly or indirectly, have been involved in any
way with the creation or distribution of these promotional materials related to [Blake]
or its securities,” and “no directors, officers, or controlling shareholders, directly or
indirectly, have been involved in any way with the creation or distribution of these
promotional materials related to [Blake] or its securities” and “no directors, officers,
or control persons have sold or purchased [Blake] or its securities within the past 90
days.”  In reality, control persons of Blake, (i.e., the Control Group), were paying for
the Blake promotion and illegally dumping their shares.
FIRST CLAIM FOR RELIEF
Fraud in the Connection with the Purchase and Sale of Securities
Violations of Section 10(b) of the Exchange Act and Rule 10b-5
(against Defendant Sidoti)
72. The SEC realleges and incorporates by reference paragraphs 1 through
71 above.
73. During the Relevant Period, shares of Blake were securities under
Section 3(a)(1) of the Exchange Act, 15 U.S.C. § 78c(a)(10).
74. By engaging in the conduct described above, Defendant Sidoti, directly
or indirectly, in connection with the purchase or sale of a security, by the use of
means or instrumentalities of interstate commerce, of the mails, or of the facilities of
a national securities exchange:  (a) employed devices, schemes, or artifices to
defraud; (b) made untrue statements of a material fact or omitted to state a material
fact necessary in order to make the statements made, in the light of the circumstances
under which they were made, not misleading; and (c) engaged in acts, practices, or
courses of business which operated or would operate as a fraud or deceit upon other
persons.

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75. By engaging in the conduct described above, Defendant Sidoti 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), 10b-5(b), and 10b-5(c)
thereunder, 17 C.F.R. §§ 240.10b-5(a), 240.10b-5(b) & 240.10b-5(c).
SECOND CLAIM FOR RELIEF
Fraud in the Offer or Sale of Securities
Violations of Section 17(a) of the Securities Act
(against Defendant Sidoti)
76. The SEC realleges and incorporates by reference paragraphs 1 through
71 above.
77. During the Relevant Period, shares of Blake were securities under
Section 2(a)(1) of the Securities Act, 15 U.S.C. § 77b(a)(1).
78. By engaging in the conduct described above, Defendant Sidoti, directly
or indirectly, in the offer or sale of securities, and by the use of means or instruments
of transportation or communication in interstate commerce or by use of the mails
directly or indirectly:  (a) employed devices, schemes, or artifices to defraud; and (b)
engaged in transactions, practices, or courses of business which operated or would
operate as a fraud or deceit upon the purchaser.
79. Defendant Sidoti, with scienter, employed devices, schemes and artifices
to defraud; and with scienter or negligence, engaged in transactions, practices, or
courses of business which operated or would operate as a fraud or deceit upon the
purchaser.
80. By engaging in the conduct described above, Defendant Sidoti violated,
and unless restrained and enjoined will continue to violate, Sections 17(a)(1) and
17(a)(3) of the Securities Act, 15 U.S.C. §§ 77q(a)(1) & 77q(a)(3).
///
///
///

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THIRD CLAIM FOR RELIEF
Unregistered Offer and Sale of Securities
Violations of Sections 5(a) and 5(c) of the Securities Act
(against Defendant Sidoti)
81. The SEC realleges and incorporates by reference paragraphs 1 through
71 above.
82. During the Relevant Period, shares of Blake were securities under
Section 2(a)(1) of the Securities Act, 15 U.S.C. § 77b(a)(1).
83. By engaging in the conduct described above, Defendant Sidoti, directly
or indirectly, singly and in concert with others, has made use of the means or
instruments of transportation or communication in interstate commerce, or of the
mails, to offer to sell or to sell securities, or carried or caused to be carried through
the mails or in interstate commerce, by means or instruments of transportation,
securities for the purpose of sale or for delivery after sale, when no registration
statement had been filed or was in effect as to such securities, and when no
exemption from registration was applicable.
84. By engaging in the conduct described above, Defendant Sidoti has
violated, and unless restrained and enjoined will continue to violate, Sections 5(a) and
5(c), 15 U.S.C. §§ 77e(a) & 77e(c).
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that Defendant committed the
alleged violations.
II.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Sidoti and her agents, servants, employees
and attorneys, and those persons in active concert or participation with any of them,

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who receive actual notice of the judgment by personal service or otherwise, and each
of them, from violating Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], and
Section 10(b) of the Exchange Act [15 U.S.C. §§ 78j(b)] and Rule 10b-5 thereunder
[17 C.F.R. § 240.10b-5].
III.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Sidoti and her agents, servants, employees
and attorneys, and those persons in active concert or participation with any of them,
who receive actual notice of the judgment by personal service or otherwise, and each
of them, from violating Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§
77e(a), 77e(c)].
IV.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Sidoti from directly or indirectly providing
professional legal services to any person or entity in connection with the offer or sale
of securities pursuant to, or claiming, an exemption under Section 4(a)(1) of the
Securities Act, predicated on Securities Act Rule 144, or any other exemption from
the registration provisions of the Securities Act, including, without limitation,
participation in the preparation or issuance of any opinion letter relating to such
offering or sale.
V.
Enter an order barring Sidoti from participating in the offer or sale of a penny
stock, as that term is defined in Section 20(g) of the Securities Act [15 U.S.C. §
77t(g)] and Section 21(d)(6) of the Exchange Act [15 U.S.C. § 78u(d)(6).
VI.
Order Defendant to pay civil penalties under Section 20(d) of the Securities
Act [15 U.S.C. §77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §
78u(d)(3)].

COMPLAINT

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VII.
Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court.
VIII.
Grant such other and further relief as this Court may determine to be just and
necessary.
Dated:  October 19, 2020

/s/ Amy J. Longo
AMY J. LONGO (Cal. Bar No. 198304)
Local Counsel
[email protected]
Securities and Exchange Commission
444 S. Flower Street, Suite 900
Los Angeles, CA 90071
Telephone: (323) 965-3835
Facsimile: (213) 443-1904

REBECCA ISRAEL (N.Y. Bar No.
4783304)
(pro hac vice application pending)
Email: [email protected]
KATHLEEN SHIELDS (Mass. Bar No.
637438)
(pro hac vice application pending)
Email: [email protected]
Securities and Exchange Commission
33 Arch Street
Boston, MA 02110
(617) 573-4582 (Israel Direct)
(617) 573-8904 (Shields Direct)
Facsimile: (617) 573-4590

Attorneys for Plaintiff
Securities and Exchange Commission

Complaints and Other Initiating Documents
5:20-cv-02178 Securities and Exchange Commission v. Sidoti
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Notice of Electronic Filing
The following transaction was entered by Longo, Amy on 10/19/2020 at 9:49 AM PDT and filed on
10/19/2020
Case Name:Securities and Exchange Commission v. Sidoti
Case Number:5:20-cv-02178
Filer:Securities and Exchange Commission
Document Number:
1
Docket Text:
COMPLAINT No Fee Required - US Government, filed by Plaintiff Securities and
Exchange Commission. (Attorney Amy J Longo added to party Securities and Exchange
Commission(pty:pla))(Longo, Amy)
5:20-cv-02178 Notice has been electronically mailed to:
Amy J Longo     [email protected], [email protected], [email protected], [email protected]
5:20-cv-02178 Notice has been delivered by First Class U. S. Mail or by other means
BY THE
FILER to :
The following document(s) are associated with this transaction:
Document description:Main Document
Original filename:F:\marcelom\Sidoti\Complaint (FINAL).pdf
Electronic document Stamp:
[STAMP cacdStamp_ID=1020290914 [Date=10/19/2020] [FileNumber=30740391-
0] [28c03bfbd5da4e842216232ce3543f11f47ff2a1347d4f492085f0957470a73815
3f62111fd92c639c210d6875df48ecd6d945627fc8ff001610040ad83e1149]]

COMPLAINT   

 

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REBECCA ISRAEL (N.Y. Bar No. 4783304) 
(pro hac vice application pending) 
Email: [email protected] 
KATHLEEN SHIELDS (Mass. Bar No. 637438) 
(pro hac vice application pending) 
Email: [email protected] 
Securities and Exchange Commission 
33 Arch Street, 24th Floor 
Boston, MA 02110 
(617) 573-4582 (Israel Direct) 
(617) 573-8904 (Shields Direct) 
Facsimile: (617) 573-4590 
 
Local Counsel 
AMY J. LONGO (Cal. Bar No. 198304) 
Email: [email protected] 
Securities and Exchange Commission 
444 S. Flower Street, Suite 900 
Los Angeles, CA 90071 
(323) 965-3835 (Longo Direct)  
Facsimile: (213) 443-1904 

UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 
 

vs. 

JILLIAN SIDOTI, 

Defendant. 
 

 Case No. 
 
COMPLAINT 
 
DEMAND FOR JURY TRIAL 

 
 
 

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

JURISDICTION AND VENUE 

1. The Court has jurisdiction over this action pursuant to Sections 20(b), 

20(d)(1) and 22(a) of the Securities Act of 1933 (“Securities Act”), 15 U.S.C. §§ 

77t(b), 77t(d)(1) & 77v(a), and Sections 21(d)(1), 21(d)(3)(A), 21(e) and 27(a) of the 

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

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

2. Defendant has, directly or indirectly, made use of the means or 

instrumentalities of interstate commerce, or of the mails, in connection with the 

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

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

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

because certain of the transactions, acts, practices and courses of conduct constituting 

violations of the federal securities laws occurred within this district.  In addition, 

venue is proper in this district because at all relevant times, Defendant Sidoti 

maintained a law office in this district and also resides in this district. 

SUMMARY 

4. This is a securities fraud enforcement action. Sidoti, a licensed attorney, 

engaged in fraud in the course of shepherding a public shell company from inception 

to public trading. That company was Blake Insomnia Therapeutics, Inc. (“Blake” or 

“the Company”). Sidoti provided legal advice and services related to Blake from the 

time of its inception in 2012 until approximately the middle of 2017. 

5. In 2012, Sidoti helped to set up the Blake shell by drafting, signing, and 

submitting to the Commission legal documents that contained materially false 

information, and she did so despite knowing that the information was false. 

Specifically, Sidoti knew that the founders of Blake had no intention of pursuing the 

Company’s stated business plan, and she knew that the purported investors named in 

the documents she filed had not actually invested any money; as Blake’s founders 

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told Sidoti, they reimbursed those purported investors for their “purchases” of shares. 

6. In 2013 and 2014, Sidoti arranged to sell the fraudulently constituted 

Company and almost all of its shares to one or more individuals, who then 

collectively controlled Blake (the “Control Group”). Sidoti helped the Control Group 

conceal its collective control of Blake by dividing the Blake shares it purchased 

among a network of foreign nominee entities that were controlled by the Control 

Group.  

7. In 2014 and 2015, Sidoti prepared legal opinion letters that: (1) falsely 

described the initial registration of Blake stock and (2) included materially 

misleading statements about the control of the Blake shares. This was an essential 

step in positioning the Control Group to illegally dump its shares by selling them into 

the market.   

8. Sidoti’s false and materially misleading opinion letters enabled the 

Control Group illegally to sell its shares by evading federal securities laws that: (1) 

require such shares to be issued pursuant to a valid registration statement; (2) require 

disclosure of truthful information about ownership and control of companies that sell 

stock to the public; and (3) restrict the amounts of stock that may be sold by company 

affiliates such as the Control Group. By concealing the Control Group’s illegal sales 

of stock -- as affiliates -- Sidoti enabled the Control Group to disguise its sales of 

stock as ordinary trading by ordinary investors. In reality, those sales were a 

liquidation of shares by the Control Group. 

9. In 2017, as the Control Group illegally sold shares of Blake into the 

market during a promotional campaign, Sidoti continued to represent the Company 

and responded to inquiries regarding the ownership of its shares being sold to the 

public.  

10. Sidoti’s conduct enabled the Control Group illegally to sell 

approximately 7.2 million shares of Blake to the public.  

11. As a result of the conduct alleged herein, Sidoti violated, and unless 

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restrained and enjoined will continue to violate, Sections 5(a), 5(c), 17(a)(1), and 

17(a)(3) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 

thereunder. 

12. The Commission seeks a permanent injunction against Sidoti, enjoining 

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

in this Complaint; civil penalties pursuant to Section 20(d) of the Securities Act [15 

U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)]; an 

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

Section 20(g) of the Securities Act [15 U.S.C. §77t(g)] and/or Section 21(d) of the 

Exchange Act [15 U.S.C. §78u(d)]; a permanent injunction restraining Sidoti from 

providing legal services in connection with the offer or sale of certain securities; and 

such other relief as the Court may deem appropriate. 

DEFENDANT 

13. Jillian Sidoti, age 42, resides in Winchester, California. Sidoti is a 

partner at the law firm of Trowbridge & Sidoti LLP (also known as 

“Crowdfundinglawyers.net”), which is based in Murrieta, California.   

RELATED ENTITY 

14. Blake Insomnia Therapeutics, Inc. (“Blake”) is a Nevada corporation 

that purportedly has a principal place of business in New York, New York. Blake was 

originally incorporated in Nevada in August 2012 as Book It Local Inc. Blake 

changed its name to BioHemp International, Inc. in June 2019. The Commission 

suspended trading in Blake stock (Ticker: BKIT) for 10 days effective July 26, 2019. 

THE ALLEGATIONS 

A. Background and Terminology 

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

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

called “affiliates” and the public companies are called “issuers.” An “affiliate” of an 

issuer is a person or entity that, directly or indirectly through one or more 

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intermediaries, controls, is controlled by, or is under common control with, such 

issuer. “Control” means the power to direct management and policies of the company 

in question. Affiliates include officers, directors and controlling shareholders, as well 

as any person who is under “common control” with, or has common control of, an 

issuer. As used herein, the term “Control Group” means a group that collectively is an 

“affiliate” of an issuer. 

16. Before selling stock, affiliates are required to: (1) register the stock with 

the Commission pursuant to Section 5 of the Securities Act [15 U.S.C. §77e]; (2) sell 

the stock pursuant to an applicable exemption from registration; or (3) sell the stock 

pursuant to the conditions set forth in SEC Rule 144 [17 C.F.R. §240.144], which 

include limitations on the amount of stock an affiliate can legally sell. 

17. Investors in certain public companies that, like Blake, have equity 

securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. §781], 

are required publicly to disclose any ownership interest in excess of 5% of the 

company’s publicly traded stock. Such registration requirements, sale restrictions, 

and disclosure obligations are critical safeguards designed to inform investors about 

the nature of the stock they are holding or considering buying, and from whom they 

would be buying that stock. 

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

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

an affiliate of the 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. A 

registration statement is also required to disclose any person or group who is the 

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beneficial owner of more than 5% of the company’s securities. 

19. “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, 

however, and apply to each separate offer and sale as detailed in the registration 

statement. Registration, therefore, does not attach to the security itself, and 

registration at one stage for one party does not necessarily suffice to register 

subsequent offers and sales by the same or different parties. Thus, when an affiliate 

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

those shares automatically become subject to the legal restrictions on sales by an 

affiliate, which strictly limit the quantity of shares that may be sold in the public 

markets absent registration. Without registration, affiliates are prohibited from selling 

large quantities of an issuer’s shares, regardless of how the affiliates obtained those 

shares. 

20. The term “float,” as used herein, refers to an issuer’s purportedly 

unrestricted stock that is available for trading. Sidoti and the Control Group’s 

representatives sometimes referred to Blake’s purportedly unrestricted shares or float 

as “free-trading” shares. 

21. 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. 

22. The Depository Trust Corporation (“DTC”) is a central securities 

depository that serves as a custodian of securities. DTC performs the electronic 

exchange for securities on behalf of buyers and sellers and settles the vast majority of 

securities transactions in the United States. If an issuer’s securities are deemed “DTC 

eligible,” DTC will hold an inventory of eligible shares on deposit. DTC defines an 

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eligible security as “one that is freely tradeable pursuant to U.S. securities laws and is 

otherwise qualified to be held at DTC and serviced.” 

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

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

commencing business operations, individuals sometimes file materially false 

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

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

for substantial sums. 

B. Sidoti Schemed to Set Up Several Sham Shell Companies with Two Other 

Individuals 

24. In June 2012, Sidoti had a phone call with Individuals A and B. 

Individual A was a longtime client of Sidoti’s and Individual B was Individual A’s 

business partner. They discussed a scheme involving the creation and sale of six shell 

companies. One of those shell companies became Blake.  

25. Individuals A and B told Sidoti that: (1) they intended to start two shell 

companies per week for the next three weeks; (2) they had not yet decided what they 

were going to name the six companies; (3) they did not yet have ideas for the 

purported business purposes for at least four of the six proposed companies; and (4) 

they had not yet decided whom they would appoint as the purported officers for any 

of the companies.  

26. On the same phone call, Individuals A and B explained to Sidoti that, in 

sum and in substance, none of the companies’ shareholders would be bona fide 

investors, but that they intended to structure each company to look like it had 35 

unaffiliated shareholders who had actually invested their own money. To create this 

appearance of multiple, independent investors, Individuals A and B intended to ask 

friends and acquaintances to sign investment paperwork, while Individuals A and B 

would give the purported investors the money to pay for their purported investments. 

Specifically, Individual A told Sidoti that he would ask each of the purported 

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investors to write a check to purchase shares in the company, and that he would give 

them each approximately $300 in cash as reimbursement. Individual A told Sidoti 

that he already had an account containing $65,000 that would fund the $10,800 in 

purported investments for each of the six companies, and that they would soon 

provide her with the shareholder names to list in the registration statements Sidoti had 

agreed to prepare for each company. 

27. As discussed on the phone call, Individuals A and B planned to ask 

acquaintances to pose as officers of each company in Commission filings, which 

require the names of a company’s officers to be listed. Sidoti thus knew that 

Individuals A and B would not appear, on paper, to have control over the companies, 

but that Individuals A and B planned to, and did, exercise actual control over the 

companies, including Blake.  

28. Individuals A and B made clear to Sidoti that the purpose of creating the 

companies was to create clean shell companies and to sell them to shell buyers. Thus, 

Sidoti knew that Individuals A and B (along with the purported officers they would 

recruit) had no intention of setting up actual operations for any of the six companies 

and had no intention to pursue the stated business for the companies. Consistent with 

this understanding, Sidoti discussed potential sales of these shells with Individuals A 

and B and advised them about variables that would make their shells more 

“marketable.” In particular, Sidoti offered guidance about the number of shares to be 

issued, and about arranging to keep a shell’s shares under common control so that all 

of the shares could be transferred to a buyer – which Sidoti described as a “fully 

deliverable” shell. During the same period, Sidoti had received emails about the 

prices at which both shell and non-shell public companies had been sold to people 

who wanted to gain access to the public securities markets. Sidoti told Individuals A 

and B that she had recently seen offers for shell companies of $300,000 or more. 

29. Sidoti and Individuals A and B discussed how Sidoti would profit from 

her participation in the scheme. They agreed that she would be paid for her services 

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in setting up the shells, that she would be paid additionally for acting as the broker in 

the anticipated sale of the shells, and that she would also receive shares of stock in 

the shell companies so she could profit when the shells were sold to buyers. 

30. Sidoti and Individuals A and B created six companies, including Blake, 

according to the plan described above. 

C. Sidoti Executed the Scheme as to Blake 

31. On August 11, 2012, Sidoti signed Articles of Incorporation to 

incorporate Blake in Nevada. Blake was originally incorporated under the name Book 

It Local, with a stock ticker “BKIT.”  

32. In or about August 2012, Individual A recruited a friend to serve as a 

figurehead CEO of Blake (“Figurehead CEO”). Individual A told Figurehead CEO 

that he would have no actual responsibilities in regards to the Company. He explained 

that Figurehead CEO’s name would simply be listed on forms, that Figurehead CEO 

would have to sign some documents, and, once he was no longer needed, Figurehead 

CEO would be instructed by Individual A to resign from his officer position. 

Figurehead CEO signed Blake’s Form S-1 and documents relating to the issuance of 

Blake shares. 

33. In August 2012, Sidoti drafted a private placement memorandum 

(“PPM”) for Blake. A PPM is a legal document typically provided to prospective 

investors when selling securities in a business. A PPM commonly describes the 

company selling the securities, the terms of the offering, and the risks of the 

investment. The Blake PPM contained numerous statements that Sidoti knew were 

false and materially misleading. For example, the PPM falsely stated that Figurehead 

CEO had provided the business plan for Blake; that Figurehead CEO was working 

with Sidoti to prepare an SEC registration statement; and that Figurehead CEO would 

coordinate all business operations for Blake.  

34. In actuality, Sidoti knew that Figurehead CEO did none of these things. 

She knew that Individuals A and B were running and controlling Blake. Though 

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neither Individual A nor B appeared, at least on paper, to have control over Blake, 

when Sidoti sought Blake’s authorization to act, she routinely reached out to 

Individuals A and B rather than to Figurehead CEO.   

35. The PPM that Sidoti drafted described Blake as a “development stage 

company” that intended to create an “online booking system” to help consumers find 

and hire live entertainment for events. Sidoti falsely stated in the PPM that Blake had 

already developed an online bidding system for entertainment booking and that the 

Company would work to build up a database of musicians for events. In actuality, 

based on her discussions with Individuals A and B, Sidoti had no reason to believe 

that anyone had begun executing any such business plans, nor did she have reason to 

believe that anyone intended to do so. Rather, as Sidoti had been told explicitly by 

Individuals A and B, they created Blake, along with the other shell companies, for the 

purpose of marketing it to a shell-buyer. 

36. In or about August 2012, Individual A recruited 35 friends and 

acquaintances to act as shareholders of Blake (the “Purported Shareholders”). Each of 

the Purported Shareholders wrote checks in the amount of $285, an amount slightly 

below the $300 figure that Individual A had previously mentioned to Sidoti. These 

checks provided written evidence of the Purported Shareholders’ “investments” in 

Blake. In turn, each of the Purported Shareholders was listed as receiving 28,500 

shares of the company. Simultaneously, Individual A repaid each Purported 

Shareholder a roughly equal sum in cash, as he had explained to Sidoti. This resulted 

in Blake issuing, on paper, 997,500 shares to the 35 Purported Shareholders.  

37. Also in August 2012, Blake issued approximately 9.6 million shares to 

four other shareholders (the “Original Blake Affiliates”). Two of these shareholders 

were companies owned or controlled by Individual A; each received about 4.5 

million shares. The third of these shareholders was Blake’s Figurehead CEO, who 

received approximately 211,000 shares. The fourth of these shareholders was 

Winchester Investments, an entity controlled by Sidoti, which received approximately 

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380,000 shares. 

38. Though Sidoti controlled Winchester Investments, she named her 

paralegal as the owner of record on the Winchester Investment incorporation 

documents and account opening documents. The paralegal acted at Sidoti’s direction 

with respect to all actions regarding Winchester Investments. 

D. Sidoti Drafted and Filed a Fraudulent Form S-1 Registration Statement 

for Blake 

39. On September 19, 2012, Sidoti, on behalf of Blake, filed with the SEC a 

Form S-1 registration statement for the approximately 10.6 million shares of Blake 

that were purportedly distributed in August 2012. Sidoti drafted Blake’s Form S-1 

registration statement, and she was paid $5,000 for her services relating to the Form 

S-1. Collectively, the approximately 10.6 million shares subject to Blake’s September 

2012 registration statement are referred to herein as the “S-1 Shares.”   

40. A Form S-1, also known as a “registration statement,” is the initial 

registration form required by the SEC for new securities. Registration statements are 

an important source of information about a company for prospective investors. Form 

S-1 requires companies to detail their current business model and planned use of 

capital proceeds, and also requires disclosure of any material business dealings 

between the company and its directors or outside counsel. Prospective investors often 

rely on the information a company supplies in its Form S-1 to determine whether they 

should invest in a stock. An issuer is liable for any material misrepresentations or 

omissions in a Form S-1, as are professionals who prepare or certify any part of the 

Form S-1, or who prepare or certify reports used in connection with the Form S-1. 

41. Sidoti also signed a legal opinion letter, which she filed with Blake’s 

Form S-1, representing that the shares of Blake were “validly issued, fully paid, and 

non-assessable.” Sidoti knew, or recklessly disregarded, that at least some of the S-1 

shares were not “validly issued” or “fully paid.” On the contrary, as Sidoti knew, the 

Purported Shareholders listed as purchasers in the Form S-1 were not bona fide 

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investors.   

42. Sidoti also repeated in the Form S-1 several of the misstatements in the 

PPM regarding the purpose of Blake and the involvement of Figurehead CEO and his 

intentions to create an online entertainment booking system. Sidoti also provided 

materially misleading information regarding her own interest in Blake. Specifically, 

she falsely asserted in the Form S-1 that she had no “direct or indirect” interest in 

Blake, even though she actually owned approximately 380,000 Blake shares through 

Winchester Investments.    

43. Blake’s S-1 registration statement was deemed effective by the 

Commission on June 10, 2013. When a registration statement is deemed effective, a 

company may legally sell the registered shares to the public. 

E. Sidoti Brokered the Sale of the Blake Shell to a Control Group 

44. In the fall of 2013, soon after completing the Form S-1 registration 

process, Sidoti was directly involved in marketing and selling the Blake shell to a 

buyer. Beginning at least by October of 2013, Sidoti began advertising the shell for 

sale. Sidoti told potential buyers that she was looking to sell Blake for “$212,500 net 

to the seller,” and that the shell was “100% deliverable” – meaning that the buyer 

could purchase all of the company’s shares, including the ones nominally held by 

independent shareholders.  

45. In or about December 2013 and January 2014, Sidoti successfully 

brokered the sale of all of the shares of Blake to one or more individuals acting in 

concert (referred to herein as the “Control Group”).  

46. Sidoti and representatives of the Control Group negotiated and agreed on 

a purchase price of $275,000 for the Blake shell. On or about December 16, 2013, 

Sidoti—who also acted as escrow agent for the transaction—received a single wire 

transfer for approximately $275,000. The $275,000 represented the purchase price for 

two separate stock purchase agreements drafted by Sidoti – one for $250,000 and one 

for $25,000 – by which the Control Group acquired almost all of the original S-1 

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shares of Blake – roughly 10.6 million shares. As the drafter of the agreements and 

the broker of the sale, Sidoti knew, or recklessly disregarded, that the buyer of those 

shares became an affiliate of Blake through the transaction, because it acquired well 

over 10% of Blake’s issued and outstanding stock. Sidoti also knew, or recklessly 

disregarded, that the Control Group’s shares legally constituted “restricted stock,” 

based on, among other provisions of the securities laws, the restrictions on sales by 

affiliates. 

47. Before formally transferring any shares, Sidoti took a series of steps 

designed to conceal the fact that a Control Group had purchased virtually all the 

shares of Blake. She helped to orchestrate a new issuance of shares of Blake, to 

increase the number of outstanding shares, and she helped to structure the Blake 

transaction as multiple separate sales, splitting up the S-1 shares purchased by the 

Control Group into smaller blocks of shares to be transferred among eight nominee 

entities set up by the Control Group.  

48. The goal of these steps was to ensure that the Control Group would 

eventually be able to sell their Blake shares into the market as if they were 

unrestricted shares. To accomplish this, the Control Group had to conceal the fact that 

it, and the members of the group, were affiliates of Blake. Otherwise, transfer agents 

and other market gatekeepers would be expected to limit or reject the Control 

Group’s future attempts to sell significant amounts of stock into the marketplace.  

49. Sidoti knew that selling stock into the public markets was the goal of 

these machinations. Specifically, in December 2013, she wrote an email to the 

Control Group’s representative explaining that the shares would have to be split up 

into smaller blocks of shares in order for the transaction to “result in fully free 

tradable stock.” She explained, “[y]ou would have to make sure it gets divided up 

amongst many shareholders (so no one is holding more than 10% of the outstanding 

stock).” In another email forwarded to Sidoti, a Control Group representative wrote, 

regarding the issuance of the 21 million new shares, “the reason to do it in this order 

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is to increase the I&O [issued and outstanding shares] prior to the assignment to keep 

all the new shareholders below 5% and therefore ensuring all shares that are assigned 

to the new holders remain free trading.” 

50. Sidoti helped to orchestrate the steps described above. In or about 

January of 2014, Blake issued 21 million new restricted shares. As noted, the purpose 

of this issuance was to dilute the percentage of shares transferred to the Control 

Group’s eight nominee entities. Sidoti was involved in preparing paperwork for the 

issuance, communicating to Blake’s transfer agent about the issuance, and arranging 

for Figurehead CEO to sign the documents for the new issuance.  

51. This issuance of new restricted shares diluted the 10.6 million original S-

1 shares to 33.5% (as opposed to 99.9%) of the total issued and outstanding shares of 

Blake. Then, as a second step, described below, those 10.6 million shares were 

further split among the Control Group’s eight nominee entities so that each entity 

would nominally hold less than 5% of the total issued and outstanding stock.  

52. Consistent with Sidoti’s email noting that the shares should be divided 

up among multiple shareholders, Sidoti drafted two stock purchase agreements that 

called for the 10.6 million S-1 shares to be split between, and transferred to, the 

Control Group’s eight offshore entities in roughly equal blocks (each equal to less 

than 5% of the outstanding stock of Blake). By assisting with the new issuance that 

diluted the stock, and by arranging to transfer the shares in a way that would create 

the appearance that there were multiple independent purchasers, Sidoti fraudulently 

concealed the Control Group’s affiliate status.  

53. The two stock purchase agreements that Sidoti drafted provided that the 

shares would be transferred and split up among the eight offshore nominees as 

follows:  

i. Shares held in the names of the 35 Purported Shareholders 

(totaling 997,500 shares) listed on the Form S-1 were transferred to one offshore 

nominee entity controlled by the Control Group. These shares did not bear restrictive 

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legends (identifying the shares as restricted from resale) because the 35 Purported 

Shareholders’ shares were purportedly registered for sale as part of the 2012 Form S-

1, and the Purported Shareholders appeared, on paper, not to be insiders or affiliates. 

ii. Shares held in the names of the Original Blake Affiliates 

(approximately 9.6 million shares) were transferred to seven other offshore nominee 

companies controlled by the Control Group in blocks of just under 1.4 million shares 

each. These shares bore restrictive legends.    

54. Sidoti instructed Blake’s transfer agent to send all of the share 

certificates in the names of the eight nominee entities to a single address. 

55. Sidoti also arranged to sell nearly all the Blake shares she held in the 

name of Winchester Investments to one of the foreign nominee entities for $60,000. 

Sidoti used those proceeds for personal purposes. 

56. In January of 2014, Blake announced in a public filing a change of 

control and business purpose, including the installation of a new CEO. Sidoti agreed 

to be counsel for Blake going forward. 

F. Sidoti Positioned the Control Group to Sell Blake’s Shares to the Public by 

Writing and Signing Materially Misleading Legal Opinion Letters 

57. Once the Control Group had acquired Blake’s shares and held them in 

the name of its eight nominee entities, Sidoti played a key role in getting the shares 

ready for public sale. Sidoti authored and signed opinion letters that she knew, or was 

reckless in not knowing, contained material misstatements. She sent these opinion 

letters to a transfer agent and to a securities settlement provider, to induce them to 

make Blake’s shares available for sale in the securities markets. 

Transfer Agent Letters 

58. On or about December 5, 2014, Sidoti drafted and sent at least two 

opinion letters to Blake’s transfer agent. One letter opined on the stock purchase 

agreement that conveyed the shares held by the 35 Purported Shareholders listed on 

Blake’s Form S-1 registration statement to one of the Control Group’s foreign 

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nominee entities. Another letter opined on the stock purchase agreement that 

conveyed approximately 9.6 million shares, from the Original Blake Affiliates, 

including Sidoti’s Winchester Investments. These shares had been conveyed to the 

seven additional foreign nominees for the Control Group, with each nominee entity 

receiving approximately 1.3 to 1.39 million shares. 

59. In both letters, Sidoti falsely represented that “the Shares were registered 

on an S-1 Registration Statement,” that they were validly issued, that they “will no 

longer be restricted as affiliate shares,” and “may be issued free of restrictive legend.” 

She concluded each letter by stating “I am of the opinion that the Shares are free-

trading and may [be] transferred free of a restrictive legend.” 

60. In writing the December 5, 2014 opinion letters, Sidoti intended to 

induce the transfer agent to remove the restrictive legends that would otherwise limit 

the sales of stock by the Control Group.  

61. At the time she signed the Opinion Letters, Sidoti knew, or was reckless 

in not knowing, that (1) the Form S-1 registration statement, on which she purported 

to rely, contained several material misstatements, and (2) the Control Group’s eight 

nominee entities collectively owned well over 10% of Blake’s issued and outstanding 

shares and owned almost 99% of Blake’s float – and therefore were affiliates of 

Blake. 

DTC Letter 

62.  To further position the Control Group to dump Blake shares, Sidoti 

signed and sent to DTC a November 17, 2015 opinion letter regarding Blake. Sidoti 

provided the letter to DTC to support a determination by DTC that the Blake shares 

were “eligible for DTC book-entry delivery, settlement and depository services.” 

Depositing shares at DTC is the primary route through which sellers of securities can 

trade with retail investors, and this was critical to enable the Control Group to sell its 

shares of Blake to the public. 

63. Sidoti stated in her DTC opinion letter: 

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We have acted as securities counsel to Blake Insomnia 
Therapeutics, Inc….in connection with the deposit at [DTC] of up 
to 10,597,572 shares of Common Stock….We are providing this 
opinion at the request of the Company to support a determination 
by DTC that the Subject Securities are eligible for DTC book-
entry delivery, settlement and depository services as of the date 
hereof…. 
 
The Subject Securities were originally issued and sold under an 
effective S-1 registration statement filed on September 19, 2012 
…  
 
Based on the foregoing, we are of the opinion that: (a) the Subject 
Securities are not “restricted securities” as defined in Rule 
144(a)(3) under the Securities Act, and (b) the Subject Securities 
are freely transferable without registration under the Securities 
Act by a holder which is not an “affiliate” of the Company as 
defined in Rule 144(a)(1) under the Securities Act and has not 
been an “affiliate” within 90 days of such transfer. 

 

64.  At the time she signed and submitted this opinion letter to DTC, Sidoti, 

knew, or recklessly disregarded, that her letter contained false statements and/or was 

materially misleading. 

65. Sidoti’s representations regarding Blake’s Form S-1 were materially 

misleading in that she knew the 35 Purported Shareholders listed in the Form S-1 

were not bona fide investors and had not spent their own money to invest. 

66. Sidoti’s representation that the subject securities “are not ‘restricted 

securities,’” was materially misleading in that she knew, or recklessly disregarded, 

that these shares were legally restricted from resale because the shares were owned by 

affiliates of Blake – namely, the Control Group, who owned collectively 

approximately 33% of Blake’s issued and outstanding stock and approximately 99% 

of Blake’s float. 

67. Sidoti had arranged for the Control Group’s purchase of the Blake shell 

and all of its stock in 2014, and had helped the Control Group split up its shares 

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among eight nominee entities.  Thus she knew, or recklessly disregarded, that those 

shares were held by affiliates who were acting as a group for the purpose of 

acquiring, holding, or disposing of Blake stock. Accordingly, the Control Group was 

prohibited from selling any of that stock—as no registration statement for such sales 

was in effect—unless it complied with the resale conditions of Securities Act Rule 

144, which strictly limits the quantity of shares that any affiliate may sell. 

68. Sidoti signed the materially misleading November 2015 opinion letter to 

DTC in order to assist the Control Group in depositing its shares for public sale, 

knowing or recklessly disregarding that she was assisting the Control Group in 

evading the legal restrictions on public sales of shares owned by corporate affiliates. 

As a result of Sidoti’s actions, the Control Group successfully deposited its Blake 

shares for sale in the securities markets. 

G. The Control Group Sold Blake’s Stock 

69. In 2016 and 2017, the Control Group indirectly paid for a promotional 

campaign that was designed to increase the price and trading volume of Blake’s 

stock. From January 9, 2017, through May of 2017, the Control Group sold over 5.2 

million shares of Blake stock in the public market, without a valid registration 

statement, and without complying with Rule 144 or any other exemption. Ultimately 

from all of its fraudulent Blake sales, the Control Group generated proceeds of at 

least $7.2 million.   

70. On January 26, 2017, Sidoti responded to a letter from OTC Markets 

Group, Inc., which had inquired about the promotional activities concerning Blake. 

Over-the-Counter (“OTC”) Markets, Inc. is a stock quotation service that facilitates 

public trading of shares in public companies that are not otherwise listed on national 

securities exchanges (like NASDAQ or the New York Stock Exchange). Blake was 

traded on the OTC Markets subsidiary known as OTC Link. In the letter, Sidoti told 

OTC Markets that Blake was not aware of any trading activity or promotional activity 

and that Blake only had two insiders, neither of whom had any intention of selling 

Case 5:20-cv-02178   Document 1   Filed 10/19/20   Page 18 of 23   Page ID #:18



 

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their shares in the near future. 

71. Shortly thereafter, Sidoti filed with the SEC a Form 8-K on Blake’s 

behalf, listing Sidoti as counsel, stating that “neither the Company, nor its directors, 

officers, or controlling shareholders, directly or indirectly, have been involved in any 

way with the creation or distribution of these promotional materials related to [Blake] 

or its securities,” and “no directors, officers, or controlling shareholders, directly or 

indirectly, have been involved in any way with the creation or distribution of these 

promotional materials related to [Blake] or its securities” and “no directors, officers, 

or control persons have sold or purchased [Blake] or its securities within the past 90 

days.”  In reality, control persons of Blake, (i.e., the Control Group), were paying for 

the Blake promotion and illegally dumping their shares. 

FIRST CLAIM FOR RELIEF 

Fraud in the Connection with the Purchase and Sale of Securities 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5 

(against Defendant Sidoti) 

72. The SEC realleges and incorporates by reference paragraphs 1 through 

71 above. 

73. During the Relevant Period, shares of Blake were securities under 

Section 3(a)(1) of the Exchange Act, 15 U.S.C. § 78c(a)(10). 

74. By engaging in the conduct described above, Defendant Sidoti, directly 

or indirectly, in connection with the purchase or sale of a security, by the use of 

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

a national securities exchange:  (a) employed devices, schemes, or artifices to 

defraud; (b) made untrue statements of a material fact or omitted to state a material 

fact necessary in order to make the statements made, in the light of the circumstances 

under which they were made, not misleading; and (c) engaged in acts, practices, or 

courses of business which operated or would operate as a fraud or deceit upon other 

persons. 

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75. By engaging in the conduct described above, Defendant Sidoti 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), 10b-5(b), and 10b-5(c) 

thereunder, 17 C.F.R. §§ 240.10b-5(a), 240.10b-5(b) & 240.10b-5(c). 

SECOND CLAIM FOR RELIEF 

Fraud in the Offer or Sale of Securities 

Violations of Section 17(a) of the Securities Act 

(against Defendant Sidoti) 

76. The SEC realleges and incorporates by reference paragraphs 1 through 

71 above. 

77. During the Relevant Period, shares of Blake were securities under 

Section 2(a)(1) of the Securities Act, 15 U.S.C. § 77b(a)(1). 

78. By engaging in the conduct described above, Defendant Sidoti, directly 

or indirectly, in the offer or sale of securities, and by the use of means or instruments 

of transportation or communication in interstate commerce or by use of the mails 

directly or indirectly:  (a) employed devices, schemes, or artifices to defraud; and (b) 

engaged in transactions, practices, or courses of business which operated or would 

operate as a fraud or deceit upon the purchaser. 

79. Defendant Sidoti, with scienter, employed devices, schemes and artifices 

to defraud; and with scienter or negligence, engaged in transactions, practices, or 

courses of business which operated or would operate as a fraud or deceit upon the 

purchaser. 

80. By engaging in the conduct described above, Defendant Sidoti violated, 

and unless restrained and enjoined will continue to violate, Sections 17(a)(1) and 

17(a)(3) of the Securities Act, 15 U.S.C. §§ 77q(a)(1) & 77q(a)(3). 

/// 

/// 

/// 

Case 5:20-cv-02178   Document 1   Filed 10/19/20   Page 20 of 23   Page ID #:20



 

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THIRD CLAIM FOR RELIEF 

Unregistered Offer and Sale of Securities 

Violations of Sections 5(a) and 5(c) of the Securities Act 

(against Defendant Sidoti) 

81. The SEC realleges and incorporates by reference paragraphs 1 through 

71 above. 

82. During the Relevant Period, shares of Blake were securities under 

Section 2(a)(1) of the Securities Act, 15 U.S.C. § 77b(a)(1). 

83. By engaging in the conduct described above, Defendant Sidoti, directly 

or indirectly, singly and in concert with others, has made use of the means or 

instruments of transportation or communication in interstate commerce, or of the 

mails, to offer to sell or to sell securities, or carried or caused to be carried through 

the mails or in interstate commerce, by means or instruments of transportation, 

securities for the purpose of sale or for delivery after sale, when no registration 

statement had been filed or was in effect as to such securities, and when no 

exemption from registration was applicable. 

84. By engaging in the conduct described above, Defendant Sidoti has 

violated, and unless restrained and enjoined will continue to violate, Sections 5(a) and 

5(c), 15 U.S.C. §§ 77e(a) & 77e(c). 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that the Court: 

I. 

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

alleged violations. 

II. 

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

Civil Procedure, permanently enjoining Sidoti and her agents, servants, employees 

and attorneys, and those persons in active concert or participation with any of them, 

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who receive actual notice of the judgment by personal service or otherwise, and each 

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

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

[17 C.F.R. § 240.10b-5]. 

III. 

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

Civil Procedure, permanently enjoining Sidoti and her agents, servants, employees 

and attorneys, and those persons in active concert or participation with any of them, 

who receive actual notice of the judgment by personal service or otherwise, and each 

of them, from violating Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 

77e(a), 77e(c)]. 

IV. 

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

Civil Procedure, permanently enjoining Sidoti from directly or indirectly providing 

professional legal services to any person or entity in connection with the offer or sale 

of securities pursuant to, or claiming, an exemption under Section 4(a)(1) of the 

Securities Act, predicated on Securities Act Rule 144, or any other exemption from 

the registration provisions of the Securities Act, including, without limitation, 

participation in the preparation or issuance of any opinion letter relating to such 

offering or sale. 

V. 

Enter an order barring Sidoti from participating in the offer or sale of a penny 

stock, as that term is defined in Section 20(g) of the Securities Act [15 U.S.C. § 

77t(g)] and Section 21(d)(6) of the Exchange Act [15 U.S.C. § 78u(d)(6). 

VI. 

Order Defendant to pay civil penalties under Section 20(d) of the Securities 

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

78u(d)(3)]. 

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VII. 

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

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

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

motion for additional relief within the jurisdiction of this Court. 

VIII. 

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

necessary. 

Dated:  October 19, 2020  

 /s/ Amy J. Longo 
AMY J. LONGO (Cal. Bar No. 198304) 
Local Counsel 
[email protected] 
Securities and Exchange Commission 
444 S. Flower Street, Suite 900 
Los Angeles, CA 90071 
Telephone: (323) 965-3835 
Facsimile: (213) 443-1904 
 
REBECCA ISRAEL (N.Y. Bar No. 
4783304) 
(pro hac vice application pending) 
Email: [email protected] 
KATHLEEN SHIELDS (Mass. Bar No. 
637438) 
(pro hac vice application pending) 
Email: [email protected] 
Securities and Exchange Commission 
33 Arch Street 
Boston, MA 02110 
(617) 573-4582 (Israel Direct) 
(617) 573-8904 (Shields Direct) 
Facsimile: (617) 573-4590 
 
Attorneys for Plaintiff 
Securities and Exchange Commission 

 

Case 5:20-cv-02178   Document 1   Filed 10/19/20   Page 23 of 23   Page ID #:23



Complaints and Other Initiating Documents 
5:20-cv-02178 Securities and Exchange Commission v. Sidoti

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Notice of Electronic Filing

The following transaction was entered by Longo, Amy on 10/19/2020 at 9:49 AM PDT and filed on 
10/19/2020 
Case Name: Securities and Exchange Commission v. Sidoti
Case Number: 5:20-cv-02178
Filer: Securities and Exchange Commission
Document Number:1

Docket Text:
COMPLAINT No Fee Required - US Government, filed by Plaintiff Securities and 
Exchange Commission. (Attorney Amy J Longo added to party Securities and Exchange 
Commission(pty:pla))(Longo, Amy)

5:20-cv-02178 Notice has been electronically mailed to: 

Amy J Longo     [email protected], [email protected], [email protected], [email protected] 

5:20-cv-02178 Notice has been delivered by First Class U. S. Mail or by other means BY THE 
FILER to : 

The following document(s) are associated with this transaction:

Document description:Main Document 
Original filename:F:\marcelom\Sidoti\Complaint (FINAL).pdf
Electronic document Stamp:
[STAMP cacdStamp_ID=1020290914 [Date=10/19/2020] [FileNumber=30740391-
0] [28c03bfbd5da4e842216232ce3543f11f47ff2a1347d4f492085f0957470a73815
3f62111fd92c639c210d6875df48ecd6d945627fc8ff001610040ad83e1149]]