U.S. Securities and Exchange Commission v. Hall et al

On August 17, 2021, the Securities and Exchange Commission (the “SEC” or “Commission”), represented by Amy F. Hartman, Jonathan S. Polish, and Stephanie L. Reinhart, attorneys at SEC’s Regional Office in Chicago, filed a civil enforcement action against Rising Biosciences, Inc. (“RBII”), and Arthur Hall (collectively, the “Defendants”). Plaintiffs filed suit seeking injunctive relief, disgorgement of all ill-gotten gains with pre-judgment interest, and civil monetary penalties, for allegedly making materially false and misleading statements regarding disinfectant products RBII launched purportedly in response to COVID-19. This case was filed in U.S. District Court in the Northern District of Ohio with Judge James R. Knepp II presiding.

In its complaint, the SEC alleged that, “Between at least April 2020 and October 2020, defendant Rising Biosciences, Inc. (“RBII”), an Ohio microcap company, and its CEO, defendant Arthur Hall, made materially false and misleading statements regarding disinfectant products RBII launched purportedly in response to COVID-19. Defendants represented that the products, including Oxithymol, the Oxi Thyme system, and/or their ingredients, were approved by the United States Centers for Disease Control and Prevention (“CDC”) or registered with the United States Environmental Protection Agency (“EPA”). They made these false and misleading statements in RBII press releases, on two RBII websites, and in RBII social media videos describing efforts to combat COVID-19 in schools, daycare facilities, retail stores, fitness centers, hotels, and restaurants, among other public places.” 

The SEC further alleged that, “Neither Oxithymol nor its purported ingredients were CDC approved, and neither Oxi Thyme nor Oxithymol was registered with the EPA for any use. Further, RBII did not use Oxithymol in its Oxi Thyme system. Instead, RBII purchased and rebottled Oxy Blast 50, a pesticide produced by another company, and sold that product for use in its Oxi Thyme system. Oxy Blast 50 is EPA registered as a pesticide. Oxi Blast 50 is not EPA registered for use in killing viruses, and it does not appear on the EPA’s “List N” of products that meet EPA criteria for use against the virus that causes COVID-19.”

The only claim for relief laid down by the SEC is against both defendants for violations of Section 10(b) of the Exchange Act, and Exchange Act Rule 10b-5. The plaintiff alleged that, between April 2020 and August 25, 2020, RBII’s common stock was quoted and traded on OTC Link, whose parent company, OTC Markets Group Inc. Investors reacted enthusiastically to Defendants’ false and misleading public pronouncements, as reflected in the trading volume and price of RBII stock. 

In its prayer for relief, the SEC requested the Court to permanently enjoin defendants from violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC also requested that the Court order defendants to disgorge the ill-gotten gains, including prejudgment interest, and to pay civil penalties pursuant to Section 21(d)(3) of the Exchange Act. Pursuant to Section 21(d)(2) of the Exchange Act, the plaintiff requests the Court prohibit defendant Arthur Hall from acting as an officer or director of any issuer that has a class of securities registered pursuant to Section 12 of the Exchange Act or that is required to file reports pursuant to Section 15(d) of the Exchange Act. The plaintiff requests the Court permanently bar defendant Arthur Hall from participating in an offering of penny stock, including engaging in activities with a broker, dealer, or issuer for purposes of issuing, trading, or inducing or attempting to induce the purchase or sale of any penny stock. 

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