THIEVES STEAL MILLIONS IN PENNY STOCK SCHEME, SPLIT LOOT!

SEC v. Justin W. Herman, Phillip W. Offill, Jr. — U.S. Securities and Exchange Commission Litigation Release No. 26249, dated February 19, 2025.

The SEC charged Phillip W. Offill, Jr. and Justin W. Herman with a penny stock fraud scheme. They allegedly misappropriated and sold millions of shares using forged documents. The SEC obtained a final judgment against Herman, and the case against Offill was dismissed due to his death.

In Plain English

Imagine someone secretly took millions of shares of a small company's stock that didn't belong to them. Then, they used fake papers and made-up agreements to sell those shares. The SEC stepped in to stop this. One person involved settled, and the case against the other was closed because they passed away.

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. Targeting Microcap Stock Offill and Herman identified a microcap company whose shares were valuable. They planned to illicitly gain control of a significant portion of this company's stock.
2. Forging Documents To execute their plan, the defendants created forged documents. These documents were crucial for making their fraudulent claims of ownership appear legitimate.
3. Creating Sham Agreements Alongside forged documents, they fabricated sham agreements. These agreements were designed to mask the true nature of their actions and legitimize their control over the shares.
4. Misappropriating Shares Using the forged documents and sham agreements, Offill and Herman misappropriated millions of shares of the microcap company's stock. These shares rightfully belonged to the company's former controlling shareholder.
5. Selling the Stock Once they had illicitly obtained millions of shares, the defendants proceeded to sell them on the market. This action generated proceeds from the fraudulent scheme.
6. Sharing Illicit Proceeds The money obtained from selling the misappropriated shares was then shared between Offill and Herman. This marked the culmination of their fraudulent scheme.

The Enforcement Action

On January 31, 2025, the U.S. District Court for the Northern District of Texas entered a final judgment dismissing the Securities and Exchange Commission’s claims against Phillip W. Offill, Jr. following Offill’s death. The Commission previously obtained a final judgment against Offill’s co-defendant, Justin W. Herman, who alongside Offill was charged with misappropriating and selling millions of shares of a penny stock company using forged documents and sham agreements. The SEC filed its complaint against Offill and Herman on January 19, 2022, charging both with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder and Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933. On July 16, 2024, the Court entered a final judgment against Herman, permanently enjoining him from future violations of Section 17(a) of the Securities Act and Section 10(b) the Exchange Act and Rule 10b-5 thereunder and from participating in the issuance, purchase, offer, or sale of any security not for his own personal account. The Court also ordered Herman to pay disgorgement and prejudgment interest in the amount of $1,117,325, which the Court deemed satisfied by the criminal restitution ordered in a parallel criminal case.

Named in this action: Justin W. Herman, Phillip W. Offill, Jr..

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