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SEC v. Michael Caridi — U.S. Securities and Exchange Commission Litigation Release No. 26213, dated January 8, 2025.

Michael Caridi, former Chairman of Tree of Knowledge International Corp. (TOKI), was charged by the SEC for misleading investors about the company's pivot to PPE. He failed to disclose a massive failed contract to supply N-95 masks, resulting in a significant liability and his misappropriation of over $1 million. Caridi consented to a final judgment including a civil penalty, disgorgement, and an officer/director bar.

In Plain English

Imagine a company that usually sells CBD products. The boss, Michael, told a hospital he could get them millions of masks during the pandemic. The hospital paid him almost $14 million, but he never sent the masks. Instead, Michael took over $1 million for himself and left the company with a huge debt. Later, he told investors the company was successfully selling masks, hiding the big failure and debt. The SEC stepped in and made him pay a penalty and give back money he took, and banned him from being a company leader.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. The Initial Pitch At the start of the COVID-19 pandemic in March 2020, Michael Caridi, then Chairman of Tree of Knowledge International Corp. (TOKI), approached a hospital needing N-95 masks. He falsely claimed TOKI had a vast international network capable of immediately supplying millions of masks.
2. The Massive Order The hospital, desperate for protection, agreed to pay TOKI nearly $13.7 million for three million N-95 masks, a sum more than double TOKI's total historical revenue. The agreement stipulated delivery within two days.
3. Failure to Deliver Despite receiving the substantial payment, Caridi and TOKI failed to procure or deliver any N-95 masks to the hospital. They procured zero masks.
4. Misappropriation of Funds Instead of fulfilling the order, Caridi diverted a significant portion of the $13.7 million received from the hospital to himself, his family, and business associates. He misappropriated over $1 million from this unperformed contract.
5. Mounting Liability When the masks never arrived and the hospital demanded repayment, Caridi promised a refund. However, TOKI lacked the resources to repay the full amount, leaving the company with a massive, undisclosed liability to the hospital.
6. Concealment from Management Caridi kept the details of the failed N-95 mask transaction, his self-dealing, and the resulting financial crisis hidden from TOKI's other senior management and board members.
7. Misleading Press Releases In May and June 2020, weeks after the failed mask deal, TOKI, with Caridi's help, issued two press releases. These releases falsely touted the company's successful 'pivot' into procuring personal protective equipment (PPE) like thermometers and medical gowns.
8. False Claims to Investors The press releases quoted Caridi praising TOKI's ability to overcome obstacles in the PPE market and assured investors that no material undisclosed events had occurred, completely omitting the disastrous N-95 mask deal and its financial fallout.
9. Company Collapse and Receivership The undisclosed failed transaction created a 'cataclysmic' liability. Ultimately, a court placed TOK NV (a TOKI subsidiary) into receivership, and TOKI transferred ownership of the subsidiary and its assets to the hospital.

The Enforcement Action

On January 2, 2025, the U.S. District Court for the District of Connecticut entered a final judgment by consent against Michael Caridi. The SEC had charged Caridi in connection with fraudulent press releases issued by Tree of Knowledge International Corp. (TOKI). Caridi, acting as Chairman of TOKI’s board, assisted TOKI in issuing two press releases touting its pivot into PPE, without disclosing that Caridi and TOKI had previously failed to deliver three million N-95 masks to a Canadian hospital and that TOKI had an $11 million liability to the hospital. The SEC’s complaint alleged Caridi misappropriated over $1 million from the unperformed contract. Without admitting or denying the allegations, Caridi consented to a final judgment permanently enjoining him from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; barring him from serving as an officer and director of a public company for seven years; barring him from participating in an offering of penny stock; ordering him to pay a civil penalty of $180,000; and ordering him to pay disgorgement of $895,972, to be offset by payments made to satisfy a judgment in related private litigation.

Named in this action: Michael Caridi.

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