The Ridgewood Blog Brings a Free Market Laissez-faire Point of View to Local, New Jersey State and National Issues.
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Trenton NJ, the New Jersey Bureau of Securities today announced that New Jersey investors have until May 22, 2025 to file claims for refunds from GS Partners under a multistate agreement resolving an investigation into alleged securities violations by the company and its affiliates.
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Fair Lawn NJ, Attorney General Matthew J. Platkin announced today that the New Jersey Bureau of Securities (“Bureau”) within the Division of Consumer Affairs (“Division”) has filed a civil enforcement action against a Bergen County man and an associate who defrauded at least one New Jersey investor in an investment scheme tied to a job recruiting software service they were purportedly trying to grow.
Continue reading Fair Lawn Man Defrauds Childhood Friend Out Of $84K In Investment Scam
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Secaucus NJ, Acting Attorney General Matthew J. Platkin announced today that the New Jersey Bureau of Securities has issued a Summary Cease and Desist Order to Secaucus-based National Realty Investment Advisors, LLC (NRIA), and related entities and individuals, after determining the company fraudulently sold at least $630 million in securities to investors in New Jersey and across the nation from 2018 to 2022.
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Jersey City NJ, Acting Attorney General Matthew J. Platkin today announced that the New Jersey Bureau of Securities has issued a Summary Cease and Desist Order to stop a Jersey City-based financial services company from selling unregistered securities in the form of interest-earning cryptocurrency accounts that have raised at least $5 billion nationwide.
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North Haledon NJ, Acting Attorney General Andrew J. Bruck announced that an unregistered investment adviser was sentenced to 3 years in state prison for stealing over $471,000 from 24 investors he recruited to invest in an unregulated commodities trading group he founded called Think Big Institute, LLC (“Think Big”).
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Ridgewood NJ, Acting Attorney Andrew J. Bruck today announced that the Bureau of Securities has issued five orders to companies touting fraudulent investment opportunities relating to cryptocurrencies, directing them to stop operating in violation of New Jersey law.
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Red Bank NJ, In the latest action in its ongoing investigation of First Standard Financial Company, LLC, in Red Bank, the New Jersey Bureau of Securities today announced it has revoked the broker-dealer’s registration and obtained a court-ordered freeze of the firm’s assets amid findings that its agents raked in more than $28.7 million through pervasive unauthorized, unsuitable, and excessive trading that unjustly enriched the firm and its agents at the expense of its customers.
Continue reading New Jersey Bureau of Securities Shuts Down Red Bank Broker-Dealer for Excessive Trading Scheme
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Newark NJ, Attorney General Gurbir S. Grewal and the Bureau of Securities within the Division of Consumer Affairs today filed suit against a Middlesex County man and the various investment companies he operated, alleging he defrauded more than $1.3 million from 26 New Jersey investors who bought stock in his online gambling companies, and then used the money to bankroll his lavish lifestyle.
In a complaint filed in New Jersey Superior Court, the Bureau alleges that Sandy J. Masselli, Jr., of Old Bridge, New Jersey, told investors that the money they invested in his Carlyle Gaming & Entertainment Ltd, and its successor company, Carlyle Entertainment, Ltd. (collectively the “Carlyle Companies”) would be used for proper corporate purposes.
June 16,2018
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Trenton NJ, Attorney General Gurbir S. Grewal and the Division of Consumer Affairs announced that the Bureau of Securities (“the Bureau”) today revoked the registrations of a Morris County investment advisory firm and its owner, and assessed them $500,000 in civil penalties for fraudulently selling at least $6.1 million in unregistered securities to elderly and retired New Jersey investors.
Richard Belott, the managing member and investment adviser representative of Financial Planning Advisors, LLC (“FPA”), sold unregistered securities to at least eight investors, including elderly and retired clients of FPA, then used at least $1.55 million of investors’ funds on personal expenses, including his daughter’s college tuition, extravagant trips for himself and his wife, and mortgage payments on the couple’s beach house.
The Bureau’s action comes on World Elder Abuse Awareness Day, a day when individuals and organizations from around the globe participate in activities and events to raise awareness about the physical, emotional, and financial abuse of elders.
“Preventing the financial exploitation of seniors is a top priority for New Jersey’s Bureau of Securities, not just on World Elder Abuse Awareness Day, but every day,” Attorney General Gurbir S. Grewal. “The enforcement action announced by the Bureau today underscores our ongoing efforts to protect elder investors from financial predators in the securities market.”
In a Summary Penalty and Revocation Order issued today, Bureau Chief Christopher Gerold found that between 2008 and 2015, Belott and FPA offered and sold at least 24 promissory notes purportedly issued by local diners and a developer. Belott represented to investors that their funds were investments in those businesses.
In reality, instead of receiving promissory notes from the diners or developer, investors received personal promissory notes from the owners of those businesses, who had
undisclosed business relationships with Belott. In at least one instance, the promissory note was issued by Belott.
The promissory notes had a term of one year or more with stated interest rates ranging from 5 percent to 18 percent annually. Interest and principal payments to the promissory note investors were paid from the bank accounts of various entities, including the diners, developer and FPA, Gerold found.
In offering and selling the promissory notes, Belott failed to disclose to investors that: the diners and developer purportedly issuing the promissory notes were clients of his accounting firm, that he had outside business relationships with the owners of the businesses, or that he was a co-owner of some of the diners. Belott also failed to disclose that he received a commission on the sale of certain promissory notes he sold, or that he would use the investors’ funds for his personal benefit.
“Elderly clients of FPA trusted Belott, as their financial advisor, to guide them in making wise investments. Instead, he lured them into a fraudulent investment scheme to enrich himself,” said Paul Rodríguez, Acting Director of Division of Consumer Affairs. “These investors, some of whom risked their entire retirement savings on Belott’s scheme, had no idea that he was using their funds to subsidize his lavish lifestyle.”
As set forth in the Summary Penalty and Revocation Order, Bureau Chief Gerold found that:
Belott and FPA violated New Jersey’s Uniform Securities Law through the following activities, among others:
offering and selling unregistered securities;
engaging in fraud or deceit upon FPA’s advisory clients and others;
engaging in dishonest and unethical practices in the investment advisory business; and
failing to maintain written investment advisory contracts.
Belott violated New Jersey’s Uniform Securities Law by:
acting as an agent without registration;
making untrue statements of material fact and/or omitting to state material facts; and
making false and misleading statements to Bureau investigators during an investigative deposition.
FPA violated New Jersey’s Uniform Securities Law by:
failing to make and keep required books and records;
failing to maintain minimum capital or the required bond while having custody of clients’ funds.
The Bureau’s action was handled by Deputy Bureau Chief Amy Kopleton, Director of Examinations Stephen Bouchard, and Investigator Theresa Hendricks, within the Division of Consumer Affairs.
Deputy Attorney General and Section Chief Victoria Manning and Deputy Attorney General Katherine A. Gregory of the Securities Fraud Prosecution Section in the Division of Law represented the Bureau in this matter.
More information for both elderly investors and their caregivers can be found on the Bureau’s website at www.njconsumeraffairs.gov/bos/Pages/investormaterials.aspx or at www.ServeOurSeniors.org.
The Bureau is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. It is critical that investors “Check Before You Invest.” Investors can obtain information, including the registration status and disciplinary history, of any financial professional doing business to or from New Jersey, by contacting the Bureau toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600, or by visiting the Bureau’s website at www.NJSecurities.gov.
May 24,2018
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River Vale NJ, The New Jersey Bureau of Securities today ordered a Bergen County man and his company to pay a $100,000 civil penalty for selling unregistered fraudulent securities and misusing at least $82,000 of investors’ funds on steak dinners, limousine service, visits to a “gentlemen’s club,” and other personal expenses.
Eric J. Bruno, of River Vale, and his company Mirakill Brands, LLC, (“Mirakill”) misled at least eight investors – including at least seven from New Jersey – into buying unregistered securities in the form of membership interests and warrants to buy membership interests in Mirakill. Bruno represented Mirakill to investors as a start-up business that would be developing an antimicrobial agent for industrial use.
In a Summary Order issued today, Christopher W. Gerold, Chief of the New Jersey Bureau of Securities, found that from at least July 2013 to June 2014, Bruno and Mirakill fraudulently raised approximately $137,000 from investors by falsely claiming that the money they invested would be used to bankroll the Mirakill venture, including securing office space; paying salaries and professional fees; funding research and development; and purchasing production materials and packaging.
“Investors thought they were getting in on the ground floor of a legitimate business venture and that they would profit from its success. Instead their money was used to finance Eric Bruno’s lavish lifestyle,” said Attorney General Grewal. “New Jersey has laws to protect investors from such predatory tactics and we will vigorously enforce them to hold violators like Bruno accountable for their actions.”
Mirakill was a Nevada limited liability company formed in July 2013 and dissolved in June 2014, with offices located in Old Tappan, NJ. Bruno controlled Mirakill through his ownership of another entity he created in connection with his scam.
Bruno and Mirakill, through Bruno, represented to investors that Mirakill was a start-up business that would be developing an improved, proprietary antimicrobial additive to prevent the growth of harmful microorganismswith industrial uses, including plastics, paints, and filters (the “Mirakill Product.”) They also represented to investors in marketing materials that included a private placement memorandum that investment funds would be used for business purposes.
In the fall of 2013 Bruno, along with two other officers of Mirakill, held an event for prospective Mirakill investors. During the event, Bruno provided the 30 to 40 attendees with an overview of the Mirakill Product and its potential applications, and discussed the amount of funds that would be required to bring the product to market. After the event, several of the attendees purchased the Mirakill Securities.
The investors were provided the Mirakill private placement memo describing the Mirakill Securities, the nature of Mirakill’s business, risks, executives, consultants, projected revenues, use of funds, and other material information that would be helpful to investors. The private placement memorandum led investors to believe that their funds would be used for legitimate business purposes, and did not disclose that Bruno would use the money for his own extravagant personal expenses instead.
“Investors received documents that lent a patina of legitimacy to Bruno’s scam and helped convince them that he and the investment were on the up and up,” said Kevin Jespersen, Acting Director of the Division of Consumer Affairs. “In reality, Bruno was not registered with the Bureau as an agent of Mirakill, and the Mirakill Securities were not registered to be offered for sale in this state, as required.”
As president of Mirakill, Bruno countersigned investors’ purchase agreements. He also personally met with certain investors, received and deposited investment checks, and received wire transfers into the company’s accounts, which he controlled.
Bruno then misused at least $82,000 of investor funds for personal expenses that included cash withdrawals at ATMs and banks ($46,000), debit card charges at grocery stores, liquor stores, restaurants ($20,000), debit charges at a New York strip club ($8,800), and limousine services ($2,300.)
“Bruno was living high on the hog at the expense of the investors he fleeced,” said Bureau Chief Gerold. “This case is a prime example of why the Bureau of Securities strongly recommends that investors verify and review the registration records of anyone claiming to be an investment professional or a seller of securities before handing over any money.”
May 22,2018
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NEWARK NJ, Attorney General Gurbir S. Grewal and the Division of Consumer Affairs announced that the Bureau of Securities (“the Bureau”) today issued three emergency orders to stop online cryptocurrency-related investment entities from fraudulently offering unregistered securities in New Jersey.
The Cease and Desist Orders against Bullcoin Foundation a/k/a Bullcoin Gold (“Bullcoin”,) Trident d/b/a Trident Crypto Index Fund (“Trident”,) and Springcryptoinvest were announced today as part of “Operation Cryptosweep,” an international crackdown on fraudulent Initial Coin Offerings (“ICOs”) and crypto currency-related investment products.
More than 40 other state and provincial securities regulators in the United States and Canada are participating in the sweep, which is being coordinated by the North American Securities Administrators Association (NASAA), of which the Bureau is a member.
“New Jersey’s Bureau of Securities has been a national leader in proactively protecting investors against the significant threat of fraudulent activity involving initial coin offerings and cryptocurrency-related investment products,” said Attorney General Grewal. “Today the Bureau joins securities regulators across the nation and beyond in sending a message that we will vigilantly safeguard our financial industry from schemes and scams involving cryptocurrencies.”
Operation Cryptosweep has resulted in nearly 70 investigations and 35 completed or pending enforcement actions since the beginning of May. NASAA members are conducting additional investigations into potentially fraudulent conduct that may result in additional enforcement actions. These actions are in addition to more than a dozen enforcement actions previously undertaken by NASAA members regarding these types of products.
“New Jersey is proud to announce enforcement actions under Operation Cryptosweep to help raise public awareness of the risks associated with initial coin offerings and cryptocurrency-related investment products,” said Kevin Jespersen, Acting Director of the Division of Consumer Affairs. “The Cease and Desist Orders we issued today successfully shut down three online entities seeking to prey on New Jersey investors.”
The Bureau found that Bullcoin is offering investors an unregistered security in the form of an ICO of its Bullcoin Gold cryptocurrency (the “BCG token”) through its website and through various social media websites. The Bullcoin securities were not registered with the Bureau to be sold in New Jersey. Bullcoin further violated the law by failing to disclose key material facts to prospective investors, including its assets and liabilities, or financial information about the business; the risks associated with the BCG tokens; and the cryptocurrencies that the Bullcoin fund would invest. The Bureau also found that Bullcoin made untrue statements of material facts on its website, including that it is “the leading crypto-hedge fund,” an assertion that is either untrue or unsupported.
The Bureau found that Trident is offering investors an unregistered security in the form of an ICO of its Trident coins (“TDC Coin”) through its website and through various social media websites. The TDC Coins were not registered with the Bureau to be sold in New Jersey. Trident further violated the law by failing to disclose key material facts to prospective investors, including the identity of its principals; its physical address and principal place of business; its assets and liabilities, or financial information about the business; the persons or entities that developed the TDC coins; and the persons or entities that are buying and selling the cryptocurrency in the Trident Crypto Index Fund. The Bureau also found that Trident made untrue statements of material facts, including a statement on its website that in 2017 the Trident Crypto Index Fund had a return of more than 1400 percent but there is no evidence provided of these returns; and a statement on its WhitePaper that since the beginning of 2016 TDC coin has “gained by a factor of 154” but the Trident Website indicates that Trident was not founded until 2017.
The Bureau found that Springcryptoinvest is offering investors an unregistered security in the form of various investment packages through its website and through various social media websites. In order to invest with Springcryptoinvest, investors must open an online account through its website. After opening an account, investors are urged to fund the account by purchasing a plan using the cryptocurrencies Bitcoin, Litcoin, or payment websites PerfectMoney or Payeer. The Springcryptoinvest investment packages were not registered with the Bureau to be sold in New Jersey. Springcryptoinvest further violated the law by failing to disclose key material facts to prospective investors, including the identity of its principals; Springcryptoinvest’s assets and liabilities, and other financial information; and how investor funds are invested. The Bureau also found that Springcryptoinvest made untrue statements of material facts on its website by claiming it was incorporated in the United Kingdom in November 2002 with 04588340 as its registration number. However, United Kingdom registration number 04588340 is not assigned to Springcryptoinvest, and there is no United Kingdom registration number for the name Springcryptoinvest.
“Not every initial coin offering or cryptocurrency-related investment is fraudulent, but the risk of fraud is significant,” said Christopher W. Gerold, Chief of the New Jersey Bureau of Securities and Chair of NASAA’s Enforcement Section. “Since cryptocurrencies began attracting headlines last year, we have been warning investors to approach crypto-related investments with extreme caution and stay away from any investment that requires them to transmit funds to an unidentified online entity that fails to disclose who is behind its investment products, the financial status of its business, and the physical location of its operations.”
In April 2018, NASAA organized a task force of its member state and provincial securities regulators to begin a coordinated series of investigations into ICOs and cryptocurrency-related investment products. Regulators identified many cryptocurrency-related products and as part of its work, the task force identified hundreds of ICOs in the final stages of preparation before being launched to the public. These pending ICOs were advertised and listed on ICO aggregation sites to attract investor interest. Many have been examined and some were determined to warrant further investigation. A number of these investigations are ongoing and others resulted in enforcement actions announced today.
NASAA’s task force also found approximately 30,000 crypto-related domain name registrations, the vast majority of which appeared in 2017 and 2018.
January 10,2018
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Ridgewood NJ, With cryptocurrencies continuing to attract headlines, Attorney General Christopher S. Porrino and the Bureau of Securities, which is within the Division of Consumer Affairs, today reminded New Jersey investors to be cautious about investments involving cryptocurrencies.
“Cryptocurrencies may be the new rage when it comes to investments, but there are significant risks associated with transactions involving these predominantly unregulated currencies,” said Attorney General Porrino. “Investors should fully understand the types of currency and transactions being pitched to them before agreeing to invest.”
Cryptocurrencies are a medium of exchange that are created and stored electronically in the blockchain, a distributed public database that keeps a permanent record of digital transactions. Current common cryptocurrencies include Bitcoin, Ethereum and Litecoin. Unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets. They are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities, and are subject to little or no regulation.
A survey of state and provincial securities regulators by the North American Securities Administrators Association (NASAA), of which the Bureau of Securities is a member, shows 94 percent believe there is a “high risk of fraud” involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.
“Because of the high risk of fraud and some projections of huge returns, investors must be on alert and not be tempted to invest in cryptocurrency-related investments without first vigorously vetting any transaction,” said Sharon M. Joyce, Acting Director of the Division of Consumer Affairs. “Understanding what is being sold is the best armor an investor has against fraud.”
Last month, NASAA identified Initial Coin Offerings (ICOs) and cryptocurrency-related investment products as emerging investor threats for 2018. Unlike an Initial Public Offering (IPO) when a company sells stocks in order to raise capital, an ICO sells “tokens” in order to fund a project, usually related to the blockchain. The token likely has no value at the time of purchase. Some tokens constitute, or may be exchangeable for, a new cryptocurrency to be launched by the project, while others entitle investors to a discount, or early rights to a product or service proposed to be offered by the project.
“Transactions involving cryptocurrency are often complicated and confusing with an unproven track record. They are not designed for investors with a low tolerance for risk or volatility,” said Christopher W. Gerold, Chief of the Bureau of Securities. “The best advice we can give is for investors to be completely aware of the risks before investing and act accordingly.”
NASAA offers a short animated video to help investors understand the risks associated with ICOs and cryptocurrencies. NASAA and its members first alerted investors of the risks associated with cryptocurrencies in 2014.
Common Cryptocurrency Concerns
The following are some common concerns investors should consider before investing in any offering containing cryptocurrency:
Cryptocurrency is subject to minimal regulatory oversight, susceptible to cybersecurity breaches or hacks, and there may be no recourse should the cryptocurrency disappear.
Cryptocurrency accounts are not insured by the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits up to $250,000.
The high volatility of cryptocurrency investments makes them unsuitable for most investors, especially those investing for long-term goals or retirement.
Investors in cryptocurrency are highly reliant upon unregulated companies, including some that may lack appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.
Investors will have to rely upon the strength of their own computer security systems, as well as security systems provided by third parties, to protect purchased cryptocurrencies from theft.
Common Red Flags of Fraud
The Bureau of Securities also reminds investors to keep watch for these common red flags of investment fraud:
“Guaranteed” high investment returns. There is no such thing as guaranteed investment returns, and there is no guarantee that the cryptocurrency will increase in value. Be wary of anyone who promises a high rate of return with little or no risk.
Unsolicited offers. An unsolicited sales pitch may be part of a fraudulent investment scheme. Cryptocurrency investment opportunities are promoted aggressively through social media. Be very wary of an unsolicited communication—meaning you didn’t ask for it and don’t know the sender—about an investment opportunity.
Sounds too good to be true. If the project sounds too good to be true, it probably is. Watch out for exaggerated claims about the project’s future success.
Pressure to buy immediately. Take time to research an investment opportunity before handing over your money. Watch out for pressure to act fast or “get in on the ground floor” of a new tech trend.
Unlicensed sellers. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms. The Bureau of Securities can help investors research the background of those selling or advising the purchase of an investment.
