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THOMAS MICHAEL BAKITAS
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-18-8359-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 impose a fine upon Respondents pursuant to Section 36b-27(d) of the 2018 Supplement. |
II. RESPONDENTS
| 6. | Thomas Michael Bakitas a/k/a Michael Bakitas (“Bakitas”) is an individual whose addresses last known to the Commissioner are: 2964 State Street, Hamden, Connecticut 06517; and 1107 Del Mar Avenue, Chula Vista, California 91911-3364. Upon information and belief, Bakitas has also resided in Orange, Connecticut and in Waterbury, Connecticut. Bakitas has never been registered in any capacity under the Act. |
| 7. | DRBS Algorithm, LLC (“DRBS”) was formed as a Connecticut limited liability company on January 25, 2016. DRBS’ address last known to the Commissioner was 2964 State Street, Hamden, Connecticut 06517. Bakitas was the sole member of DRBS. DRBS was formally dissolved on February 15, 2017. At no time was DRBS registered as an investment adviser or in any other capacity under the Act. |
| 8. | On June 27, 2017, Bakitas formed Nazoraean Tutoring Services, LLC, an active Nevada limited liability company located at 1550 West Horizon Ridge Parkway, Suite 528, Henderson, Nevada 89012. |
III. STATEMENT OF FACTS
| 9. | In or about late 2015, Bakitas established an online presence, using the financial communications platform StockTwits and other social media. On StockTwits, Bakitas described himself as a “Professional trader, M.D. Physician, Mathematician & algorithm trading system inventor” who was also a “Professional Market Analyst & risk manager” and “Merrill lynch [sic] trained.” | |||||||||||
| 10. | Bakitas did not provide the Division with proof that he was a licensed physician. However, he did represent to Division staff that he had once worked as an intern at Merrill Lynch. | |||||||||||
| 11. | Bakitas also established a Twitter account under the names Algostockdoc and Nasorean Algorithms. Here, he invited followers to “Subscribe to the BEST algo team on Wall Street” by contacting Drbsalgorithm at yahoo.com “for access.” | |||||||||||
| 12. | From at least 2016 forward, Bakitas promoted his “Nasorean Algorithm Protected Trading System” online, representing that it was “low risk” and that “when we’re playing my algo numbers, which you can only get from my algorithm, which is why you’re paying for it, which is why it’s so deadly and accurate because I know how to calculate these numbers . . . .” Bakitas also explained to members that:
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| 13. | Those signing up for Bakitas’ standard plan under the Nasorean Algorithm Protected Trading System were charged $1,188 per year ($99 per month). Those members signing up for the more advanced Premium plan were charged $3,500 annually. Payment was made through PayPal. | |||||||||||
| 14. | Premium membership featured access to premium online content, intraday assistance via individual text alerts, weekend elite level content and telephone call and WhatsApp file assistance for twelve months. | |||||||||||
| 15. | As a precondition to becoming a member, members were required to agree that “any sharing of our content cancels your membership with no refund.” | |||||||||||
| 16. | Membership also featured access to podcasts of discussions by Bakitas. In addition, Bakitas had a stock favorites list, and ranked stocks between one and one hundred. Based on Bakitas’ algorithm, a stock would be assigned a number, with a number less than 50 signaling a buy. Each week, members were given a weekend game plan. | |||||||||||
| 17. | At varying intervals throughout a given week (and sometimes several times a day), Bakitas would announce the success of the trading strategy through a series of Tweets, many of which addressed individual stocks. A small sampling follows:
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| 18. | Bakitas claimed to have more than 250 members. However, he represented to the Division that none were in Connecticut. | |||||||||||
| 19. | Of those members contacted by the Division, none were provided with any specific background information on Bakitas and some did not even know his name, referring to him only as “Dr. B.” None of them appeared to be aware that, within the past ten years, Bakitas had filed a voluntary petition for bankruptcy under Chapter 7 of the Bankruptcy Code, and that the bankruptcy had been discharged on September 30, 2008 (D. Conn. Case No. 08-32108). |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE
a. Violation of Section 36b-6(c)(1) of the 2018 Supplement by Respondents –
Unregistered Investment Adviser
| 20. | Paragraphs 1 through 19, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 21. |
Bakitas, alone and under the auspices of DRBS, transacted business as an investment adviser in Connecticut absent registration, as more fully described in paragraphs 9 through 19, inclusive. Such conduct constitutes a violation of Section 36b-6(c)(1) of the 2018 Supplement, 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, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the 2018 Supplement. |
b. Violation of Section 36b-6(c)(2) of the 2018 Supplement by Bakitas –
Unregistered Investment Adviser Agent
| 22. | Paragraphs 1 through 21, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 23. |
Bakitas transacted business as an investment adviser agent of DRBS in Connecticut absent registration, as more fully described in paragraphs 9 through 19, inclusive. Such conduct constitutes a violation of Section 36b-6(c)(2) of the 2018 Supplement, which forms a basis for an order to cease and desist to be issued against Bakitas under Section 36b-27(a) of the 2018 Supplement, and for the imposition of a fine upon Bakitas under Section 36b-27(d) of the 2018 Supplement. |
Engaging an Unregistered Investment Adviser Agent
| 24. | Paragraphs 1 through 23, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 25. |
DRBS engaged an unregistered investment adviser agent, as described more fully in paragraphs 9 through 19, inclusive. Such conduct constitutes a violation of Section 36b-6(c)(3) of the 2018 Supplement, which forms a basis for an order to cease and desist to be issued against DRBS under Section 36b-27(a) of the 2018 Supplement, and the imposition of a fine upon DRBS pursuant to Section 36b-27(d) of the 2018 Supplement. |
V. ORDER TO CEASE AND DESIST, 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, Bakitas has committed at least one violation of Section 36b-6(c)(1) of the 2018 Supplement, and at least one violation of Section 36b-6(c)(2) of the 2018 Supplement;
WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, DRBS has committed at least one violation of Section 36b-6(c)(1) of the 2018 Supplement, and at least one violation of Section 36b-6(c)(3) of the 2018 Supplement;
WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist against Respondents 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 THOMAS MICHAEL BAKITAS a/k/a MICHAEL BAKITAS CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, transacting business as an investment adviser or as an investment adviser agent in Connecticut absent registration under the Act;
WHEREAS, the Commissioner ORDERS that DRBS ALGORITHM, LLC, its affiliates and successors in interest CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) transacting business as an investment adviser in Connecticut absent registration; and (2) engaging an unregistered investment adviser agent;
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to subsections (a) and (d) of Section 36b-27 of the 2018 Supplement, 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 July 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 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 17th day of May 2018. | Jorge L. Perez | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 17th day of May 2018, I caused to be mailed by certified mail, return receipt requested, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing to: Thomas Michael Bakitas a/k/a Michael Bakitas at: 2964 State Street, Hamden, Connecticut 06517, certified mail no. 7013 3020 0000 4226 6677; 1107 Del Mar Avenue, Chula Vista, California 91911-3364, certified mail no. 7013 3020 0000 4226 6684; and c/o Nazoraean Tutoring Services, LLC, 1550 West Horizon Ridge Parkway, Suite 528, Henderson, Nevada 89012, certified mail no. 7013 3020 0000 4226 6691; and to DRBS Algorithm, LLC, 2964 State Street, Hamden, Connecticut 06517, certified mail no. 7013 3020 0000 4226 6707.
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| W. C. Hall | |
| Paralegal |