The Securities and Exchange Commission (SEC) charged Paul Edalat and two pharmaceuticals companies he controlled with engaging in a fraudulent investment scheme.

Edalat has been chief executive officer, controlling shareholder, and chairman of the board at Vivera Pharmaceuticals since April 2018. During that time, he was also controlling shareholder and chairman of the board at Sentar Pharmaceuticals.

From May 2018 until June 2020, Vivera raised about $6.6 million from 63 investors through a private placement memorandum that claimed Vivera owned an exclusive global license for a method of delivering CBD and THC, both derived from cannabis, under the tongue, according to the SEC’s complaint, filed Friday in U.S. District Court for the Central District of California.

Vivera “misled potential investors” because it failed to disclose Edalat was the controlling shareholder of Vivera and Sentar and that there was an ongoing dispute about the validity of Vivera’s license, the SEC alleged.

The parties also didn’t disclose Sentar had held the license and conveyed it to a third party, according to the SEC. Vivera filed suit against the third party, claiming it was the license holder, and lost in May 2020.

Edalat “used his joint control of both companies to transfer new Vivera investor funds to Sentar,” purportedly to pay down a $10 million licensing fee, the SEC alleged. Sentar received approximately $4.5 million in supposed licensing fees from Vivera, which included at least $550,000 from Vivera investors. Amounts were moved into Edalat’s accounts, which he used to make “lavish purchases,” including a $425,000 luxury car, the agency alleged.

Edalat is enjoined from manufacturing or distributing dietary supplements, following a 2014 investigation by the Food and Drug Administration, the SEC noted.

The two companies and Edalat violated the anti-fraud provisions of the Securities Act and rules of the Securities Exchange Act, the agency alleged.

The SEC seeks permanent injunctions against the three, plus restitution and penalties.

Neither Sentar nor Vivera replied to a request for comment.