A former director of Nasdaq-listed Loop Industries has been convicted in the United States after prosecutors proved that he promoted the company’s shares to investors while secretly selling hundreds of thousands of shares for his own benefit.
Donald Danks, 69, of Irvine, California, was convicted by a federal jury on September 10 following a two-week retrial.
The jury found him guilty of conspiracy to commit securities fraud, witness tampering, obstruction of justice and perjury in connection with a six-year scheme involving Loop Industries stock and his later attempts to conceal the conduct.
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Investors bought more than $100 million of Loop shares
Danks helped form Loop Industries and served on its board of directors and audit committee.
Those positions gave him access to non-public information about the company, and prosecutors said that access continued even after he left the board.
According to evidence presented at trial, Danks encouraged investors to purchase more than $100 million worth of Loop shares.
He allegedly provided selected investors with inside information and directed purchases at particular times, prices and volumes in an effort to influence demand for the stock.
At the same time, prosecutors said, Danks was selling his own shares without properly revealing his role as the seller.
The contradiction was central to the case.
Investors were being encouraged to see Loop as an attractive investment while a company insider promoting that message was quietly reducing his own exposure.
Shell company concealed who was selling the stock
Prosecutors said Danks carried out much of the activity through Ventanas Capital LLC, a shell company he created with a former associate.
Ventanas allegedly had fictitious employees and was used to disguise Danks’ and his associate’s involvement in stock transactions.
Danks transferred hundreds of thousands of Loop shares into the company and gradually sold them, according to the Justice Department.
The government said some of the money financed the pair’s personal lifestyle.
Danks was required to disclose his control over and trading in Loop shares, but prosecutors said he failed to disclose that he was selling through Ventanas.
At the same time, he allegedly continued telling investors that Loop was a strong investment and represented that he was purchasing shares himself.
Federal prosecutors say the scheme generated more than $4 million in profits for Danks.
What made the conduct securities fraud?
The case illustrates why insider disclosure rules matter.
A company director may know information ordinary investors do not. That access can influence whether an investor buys, sells or holds a company’s stock.
US securities laws therefore impose disclosure obligations on insiders and people controlling large amounts of company stock.
The SEC had earlier alleged that Danks and other defendants concealed both their ownership of Loop shares and their connections with the company while selling stock into the public market.
The SEC’s 2022 civil complaint said the alleged scheme ran from at least 2014 until November 2018.
Federal prosecutors later brought criminal charges arising from the same wider conduct.
A crucial issue was not simply that Danks sold shares.
Company insiders are allowed to sell stock subject to applicable rules.
The fraud arose from prosecutors’ claim that he concealed his selling and control while simultaneously promoting the stock and influencing investor purchases.
That deprived investors of information that could have materially changed how they evaluated the recommendation.
Investigation led to fabricated documents and false testimony
The case did not end when regulators began asking questions.
After the SEC and FBI started investigating, prosecutors said Danks and an associate created and backdated promissory notes to make transactions appear to be legitimate loans.
Trial evidence allegedly showed that documents presented as having been created across different years were actually prepared at the same time.
Danks then testified about those documents during his first trial without revealing that they had been created after the investigation had already begun.
Prosecutors also accused him of pressuring his associate to repeat a false account about who controlled Ventanas Capital.
That conduct led to the additional convictions for witness tampering, obstruction and perjury.
His first trial ended in a mistrial, before prosecutors retried the case and secured the September 10 convictions.
Loop itself had previously disclosed the litigation
Loop Industries has acknowledged the proceedings in its regulatory filings.
In filings with the US Securities and Exchange Commission, the company described Danks as a co-founder and former director and disclosed the SEC civil complaint and federal indictment involving him and other defendants.
That distinction matters because the latest conviction is against Danks personally.
It should not be presented as a conviction of Loop Industries itself.
The SEC’s original action named multiple individuals and alleged that they participated in a deceptive scheme involving the company’s publicly traded shares.
Danks could face years in federal prison
Danks is scheduled to be sentenced on December 4 before US District Judge Cynthia A. Bashant.
The conspiracy count carries a maximum prison sentence of five years.
Witness tampering carries a maximum of 20 years, obstruction of justice up to 10 years and perjury up to five years, although the final sentence will be determined by the court and need not equal the statutory maximums.
The FBI investigated the criminal case.
For investors, the case is a reminder that a confident recommendation from someone close to a company can carry its own conflict of interest.
An insider encouraging others to buy may simultaneously have financial reasons to sell.
What this means for you:
Before acting on stock recommendations from promoters, company insiders or influential investors, check official exchange and regulatory disclosures for their actual holdings and recent transactions. A bullish public message does not necessarily mean the person delivering it is buying the stock themselves.
The420 Insight:
The most damaging allegation was not simply that Danks made millions selling Loop shares. Prosecutors proved that investors were being encouraged to buy while the insider promoting the opportunity was secretly selling — turning privileged access and investor trust into an information advantage.
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