'Politically motivated': Sublingual delivery firm hits back against SEC fraud complaint

The Securities and Exchange Commission (SEC) has charged a sublingual drug delivery company and its CEO with an alleged offering fraud that raised $6.6 million. The company, Vivera Pharmaceuticals, hit back against what it says are “meritless allegations” made in a “politically motivated” litigation filing. 

The SEC complaint (PDF) centers on the $6.6 million that Vivera raised from 63 individual investors through a private placement between May 2018 and June 2020. According to the SEC, the company claimed in the offering that it owned “an exclusive global license” to a sublingual drug delivery technology for the pharmaceutical use of cannabidiol or tetrahydrocannabinol.

Officials at the SEC found fault with several aspects of the offering, alleging that the sublingual drug delivery license was neither exclusive nor valid. The SEC made the allegation after concluding that Sentar Pharmaceuticals granted overlapping license rights to Alternate Health in 2017. 

In its public response to the SEC, Vivera referred to litigation proceedings against Alternate Health about the scope of the license. Vivera said Alternate Health is now defunct. The company’s website is offline. The SEC’s complaint states “there remained an ongoing dispute over the validity of the license that had been conveyed to Vivera due to Sentar’s prior conveyance of an exclusive license to Alternate Health.”

The SEC is also targeting Vivera over the disclosure of its links to Sentar. According to the commission, the company failed to disclose that Paul Edalat was the controlling shareholder in both companies and that he “used his joint control of both companies to transfer new Vivera investor funds to Sentar, for the purpose of paying down a $10 million licensing fee.”

Edalat, who is the CEO charged in the complaint, is accused of profiting from the “fraudulent conduct.” In the complaint, the SEC accuses Sentar of transferring “significant sums” into accounts controlled by Edalat, who then allegedly made “lavish purchases,” including down payments on two homes and a $425,000 luxury car. Vivera came out strongly against the SEC allegations.

“Vivera vehemently denies these meritless allegations and disagrees with the SEC's purported claims,” the company wrote in a statement. “Despite the injurious actions being undertaken by the SEC, Vivera remains open to reaching a resolution of this matter before any action is filed but cannot guarantee that it will be successful. To this end, Vivera will continue to cooperate with the SEC in an attempt to educate its staff as to what Vivera sees as the true facts of this matter.”