| * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * |
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
* * * |
ORDER TO CEASE AND DESIST ORDER TO MAKE RESTITUTION AND NOTICE OF RIGHT TO HEARING DOCKET NO. CRF-18-8331-S |
I. PRELIMINARY STATEMENT
| 1. | The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act. |
| 2. | Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondents to determine if Respondents have violated, are violating or are about to violate provisions of the Act or Regulations (“Investigation”). |
| 3. |
As a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act. |
| 4. | As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-27(a) of the 2018 Supplement to the General Statutes (“2018 Supplement”). |
| 5. |
As a result of the Investigation, the Commissioner has the authority to order that Respondents make restitution pursuant to Section 36b-27(b) of the 2018 Supplement. |
| 6. | As a result of the Investigation, the Commissioner has the authority to impose a fine upon Respondents pursuant to Section 36b-27(d) of the 2018 Supplement. |
II. RESPONDENTS
| 7. |
AFT is a North Carolina limited liability company formed on December 31, 2015, with its principal place of business last known to the Commissioner at 1681 Highway 73, Iron Station, North Carolina 28080-9776. |
| 8. | Freeman is an individual whose address last known to the Commissioner is 1423 Quinnipiac Avenue, Unit 703, New Haven, Connecticut 06513. Freeman is a managing member of AFT. |
| 9. | Johnson is an individual whose address last known to the Commissioner is 1423 Quinnipiac Avenue, Unit 703, New Haven, Connecticut 06513. Johnson is a managing member of AFT. |
III. STATEMENT OF FACTS
10.
Respondents purported to own and operate a start-up trucking company, which, using a fleet of tractor-trailer trucks leased through an outside company, employed drivers with routes across the country.
11.
In April 2016, Freeman and Johnson, on behalf of AFT, offered two Connecticut investors (“CT Investors”) the opportunity to invest in their trucking venture and achieve an income stream averaging $1,400 to $2,000 weekly. The CT Investors had no prior expertise or experience with the trucking industry, and relied on Respondents to manage the investment.
12.
Through a series of text messages, Johnson, alone or on behalf of AFT, represented to the CT Investors that money invested in AFT would be used to lease two additional tractor-trailer trucks. Johnson also offered to provide a letter of reference from a company with which AFT had done business.
13.
On April 26, 2016, Respondents executed an “Investor Agreement” in favor of the CT Investors and provided them with a copy of that document. Together, the CT Investors invested a total of Ten Thousand Dollars ($10,000) with the Respondents (“AFT Investment”). The investment was made by the CT Investors’ remittance of two separate checks, one in the amount of Three Thousand Six Hundred Dollars ($3,600) and the second check in the amount of Six Thousand Four Hundred Dollars ($6,400). Both checks were made out to “AFT Logistics LLC” and bore the notation “Investment.”
14.
Language in the “Investor Agreement” provided to the CT Investors and signed by Freeman and Johnson at the time of the investment on April 26, 2016, lead the CT Investors to believe that their investment would be used to lease two additional “tractors” for AFT. The Investor Agreement also reiterated that the investment would yield a return of $1,400 to $2,000 per week over the course of a twelve (12) month period that would commence no later than three (3) weeks after the first dispatch of the newly leased “tractors”.
15.
There is no evidence that Respondents actually applied the CT Investors’ investment to the lease of two additional “tractors”.
16.
While some of the money raised from the purchase of the AFT Investment by the CT Investors was used to pay general business expenses for AFT, other money raised from the CT Investors was used to pay for Respondents’ personal expenses.
17.
On or about June 2, 2016, Johnson further memorialized the investment arrangement by executing a “Loan Agreement” with one of the CT Investors. The “Loan Agreement” acknowledged receipt of the original $10,000 which had been remitted jointly with the second investor, but provided that the amount would be refunded upon request. The “Loan Agreement” stated “The loaner is demanding that his loan be paid back immediately.”
18.
To date, Respondents have failed to pay the CT Investors any of the monies they invested.
19.
The investment opportunity offered and sold by Respondents involved an investment contract, evidence of indebtedness, profit sharing agreement and/or note and therefore constituted a “security” within the meaning of 36b-3(19) of the Act, which security was never registered in Connecticut under Section 36b-16 of the Act nor was it the subject of a filed exemption claim or claim of covered security status.
20.
In connection with the offer and sale of such security, Respondents failed to disclose, inter alia, any risk factors related to the AFT Investment, any financial information on AFT, and/or that Respondents would use part of the investors’ money to pay personal expenses and other business costs not related to the leasing of two additional “tractors”. Each of these omitted items was material to investors and prospective investors.
ORDER TO MAKE RESTITUTION AND ORDER IMPOSING FINE
a. Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities
| 21. | Paragraphs 1 through 20, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 22. |
Respondents offered and sold unregistered securities in or from Connecticut to at least two Connecticut investors, as more fully described in paragraphs 10 through 20, inclusive, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 19. The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the 2018 Supplement, an order that Respondents make restitution under Section 36b-27(b) of the 2018 Supplement, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the 2018 Supplement. |
b. Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any Security
| 23. | Paragraphs 1 through 22, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 24. |
The conduct of Respondents, as more fully described in paragraphs 10 through 20, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person. Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the 2018 Supplement, an order that Respondents make restitution under Section 36b-27(b) of the 2018 Supplement, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the 2018 Supplement. |
V. ORDER
NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, AFT has committed at least one violation of Section 36b-16 of the Act and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Freeman has committed at least one violation of Section 36b-16 of the Act and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Johnson has committed at least one violation of Section 36b-16 of the Act and at least one violation of Section 36b-4(a) of the Act;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist, Order to Make Restitution, and the imposition of a fine upon Respondents is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;
WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a maximum fine not to exceed one hundred thousand dollars ($100,000) per violation upon Respondents;
WHEREAS, the Commissioner ORDERS that AFT LOGISTICS, LLC n/k/a EQUITY ONE CONTRACTORS LLC CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities; and (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that BRANDI FREEMAN CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities; and (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that JAVEIR JOHNSON a/k/a JAY JOHNSON CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities; and (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that Respondents MAKE RESTITUTION of any sums obtained as a result of Respondents’ violations of Sections 36b-4(a) and 36b-16 of the Act, plus interest at the legal rate set forth in Section 37-1 of the General Statutes of Connecticut. Specifically, the Commissioner ORDERS that:
| 1. | Within thirty (30) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with a written disclosure which covers the period from January 1, 2016 to the date this Order to Make Restitution becomes permanent and which contains (a) the name and address of each investor, (b) the amount Respondents collected from each investor, and (c) the amount of any refunds of principal or purported interest payments Respondents made to each investor; |
| 2. | Within forty-five (45) days from the date this Order to Make Restitution becomes permanent, Respondents shall reimburse each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments made to the investor, with respect to all transactions effected from January 1, 2016 to the date this Order to Make Restitution becomes permanent. Such restitution shall be made by certified check, and shall be sent by certified mail, return receipt requested, to each affected investor; and |
| 3. | Within ninety days (90) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with proof in the form of copies of the certified checks and the return receipts required by paragraph 2 of Section V of this Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Order”), that Respondents have reimbursed each investor the amount of funds collected from each such investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to all transactions effected from January 1, 2016 to the date this Order to Make Restitution becomes permanent. |
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to Section 36b-27 of the Supplement [sic], each Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order. To request a hearing, complete and return the enclosed Appearance and Request for Hearing Form to the above address. If any Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”. If a hearing is requested, the hearing will be held on June 19, 2018, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.
The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut. At such hearing, each Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.
If any Respondent does not request a hearing within the time period prescribed or fails to appear at any such hearing, the allegations herein against any such Respondent will be deemed admitted. Accordingly, the Order to Cease and Desist and Order to Make Restitution shall remain in effect and become permanent against any such Respondent and the Commissioner may order that the maximum fine be imposed upon any such Respondent.
| Dated at Hartford, Connecticut, | ____/s/_____________ | |
| this 2nd day of May 2018. | Jorge L. Perez | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 2nd day of May 2018, I caused to be mailed by certified mail, return receipt requested, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing to: AFT Logistics, LLC n/k/a Equity One Contractors LLC, 1681 Highway 73, Iron Station, North Carolina 28080-9776, certified mail no. 7014 2120 0000 3701 4932; Brandi Freeman, 1423 Quinnipiac Avenue, Unit 703, New Haven, Connecticut 06513, certified mail no. 7014 2120 0000 3701 4949; and Javeir Johnson a/k/a Jay Johnson, 1423 Quinnipiac Avenue, Unit 703, New Haven, Connecticut 06513, certified mail no. 7014 2120 0000 3701 4956.
| ___/s/______ |
| W. C. Hall |
| Paralegal |