SEC Files Lawsuit Against Rapid Therapeutic Science Laboratories Alleging Fraudulent Operations

LOS ANGELES- The U.S. Securities and Exchange Commission (SEC) has formally accused Texas-based company, Rapid Therapeutic Science Laboratories, and its founder, Donal Schmidt Jr., of engaging in a multi-faceted securities fraud and violations amounting to millions of dollars.

The suit, lodged on September 18 in the U.S. District Court for the Northern District of Texas, delineates several deceptive practices Schmidt allegedly implemented to bolster the company’s stock and deceive investors, including making up certifications and lying about sales contracts and product safety.

Accusations and Alleged Misrepresentations

According to the SEC, Schmidt spun a web of lies to promote the company’s CBD inhalers and stocks traded under the ticker symbol RTSL on the over-the-counter markets. Schmidt reportedly fabricated certifications from a non-existent industry body, made false claims about sales contracts, lied about the standards of the laboratory, and misstated credentials of the chief science officer.

Schmidt is also accused of misrepresenting the safety of Rapid’s inhalers and falsely claiming that the company had received approval to list on the Nasdaq. The SEC believes these fraudulent activities spanned over three years, from April 2020 to May 2023.

Origins of the Fraudulent Scheme

The SEC pinpointed the commencement of the scheme back to 2019, when Schmidt initiated a reverse-merger transaction that birthed Rapid as a new entity in the hemp CBD manufacturing sector. The commission alleges that the deceit commenced shortly after the inception of the company, with Schmidt creating an illusory certification from the “Cannabinoid MDI Certification Board (CMDICB),” an entity that was reportedly created by one of Schmidt’s associates.

The SEC stated that despite glaring inconsistencies in the qualifications of the individual who issued the certification, Schmidt continued to use this fake accreditation as a marketing tool to lure investors.

Stock Manipulation and Regulatory Ignorance

Schmidt is accused of manipulating stock prices through false news about sales orders, witnessing a surge in stock prices from 40 cents to $1.25. Furthermore, he allegedly lied about achieving ISO certification for a laboratory that Rapid supposedly owned, a statement he later confessed was false during an SEC testimony.

Despite receiving a formal warning from the U.S. Food and Drug Administration (FDA) regarding the violation of federal laws and potential toxicity of the CBD inhalers, Schmidt failed to notify investors and neglected to mention this critical information in a corporate overview released in September 2021. He also reportedly lied about receiving approval from Nasdaq to list Rapid’s shares, further misleading investors.

SEC’s Legal Recourse

The SEC has called for stringent legal repercussions against Schmidt and his company, urging the court to prohibit Schmidt from engaging in securities sales permanently. The commission is also seeking an order mandating the disgorgement of all profits accrued through the fraudulent scheme and is requesting the imposition of undisclosed civil penalties.

The case paints a picture of a company embroiled in deceit and manipulation, with a founder who seemingly stopped at nothing to falsely inflate the company’s market position and profitability, leaving investors in a precarious position. As the SEC pushes for justice, it remains to be seen how the court will adjudicate this case of alleged widespread corporate fraud.