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IN THE MATTER OF: MAXCOMUSA GROUP INC.
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-12-7881-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 (“Department”), 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 Act. |
| 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 Act. |
II. RESPONDENTS
| 6. | Maxcomusa Group Inc. (“Maxcom”) is a Delaware corporation with a principal place of business and address last known to the Commissioner of 61 Fair Street, Norwalk, Connecticut 06851. At all times relevant hereto, Maxcom sold electronics, such as cell phones and pre-paid calling cards, to retail and wholesale consumers. Maxcom is not and has not been registered in any capacity under the Act. |
| 7. | Christos Christoforou (“Christoforou”) is an individual whose address last known to the Commissioner is 61 Fair Street, Norwalk, Connecticut 06851. At all times relevant hereto, Christoforou was the President, director and control person of Maxcom. All of Christoforou’s business activities were conducted through Maxcom, and therefore Christoforou and Maxcom are, in all relevant respects hereto, one and the same. Christoforou is not and has not been registered in any capacity under the Act. |
III. STATEMENT OF FACTS
| 8. | Euro Group of Companies, Inc. (“Euro”) is a Delaware holding company whose principal place of business was 10 Midland Avenue, Port Chester, New York 10573. Euro relocated to 475 Whitney Avenue New Haven, Connecticut 06511 in February 2012. Euro is publicly traded on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol “EGCO.” Euro, through its subsidiaries, markets and distributes telecommunications products and services in the United States and abroad. |
| 9. | Europhone USA, LLC (“Europhone”) and Eurospeed, Inc. (“Eurospeed”) are a New York limited liability company and corporation, respectively, and subsidiaries of Euro. |
| 10. | In or around October 2007, Euro and Maxcom purportedly entered into a business relationship whereby Euro and/or its subsidiaries would pay Maxcom for selling its subsidiaries’ products to wholesalers. From May 2008 through September 2008, including the period when Respondents effected the securities sales described herein, Respondents derived an economic benefit from their relationship with Euro, receiving approximately $90,250 from Europhone and approximately $8,400 from Eurospeed for purportedly selling products on behalf of Europhone and Eurospeed. |
| 11. | On April 21, 2008, Christoforou purchased 500,000 restricted shares of Euro (“Euro Restricted Shares”) for $75,000 in a private placement at a purchase price of approximately $0.15 per share. On May 7, 2008, Christoforou purchased an additional 175,000 Euro Restricted Shares in a private placement at a purchase price of approximately $0.12 per share. On November 18, 2008, Christoforou transferred his 675,000 Euro Restricted Shares to his wife, Maria Christoforou. |
| 12. | From approximately May 7, 2008 through approximately September 17, 2008, Maxcom engaged in the business of effecting sales of Euro Restricted Shares at a price of $0.50 per share to at least six investors in Connecticut and other states. In most instances, each individual investor sent Respondents a check made out to either Maxcom or Europhone, and Christoforou then either wrote a check to Europhone from Maxcom’s checking account for the same amount or forwarded the investor’s check to Euro and/or Europhone. Euro then sent the Euro Restricted Shares certificate either directly to each individual investor or to Christoforou, who delivered the certificate to the investor. |
| 13. | By contrast, from approximately May 7, 2008 through approximately September 17, 2008, unrestricted, publicly traded shares of Euro (“Euro Public Shares”) were trading on the OTCBB primarily between $0.10 and $0.35 per share, significantly less than $0.50 a share. Except for a one day closing price of $0.40 and a single intraday trading price of $0.44, Euro Public Shares traded at or below $0.20 per share for 57 out of 93 days during the same time period that the Respondents sold Euro Restricted Shares to investors for $0.50 per share. None of the investors purchasing Euro Restricted Shares through Respondents held a controlling interest in Euro, nor was there any demonstrated basis for their paying a premium over market value for the Euro securities. |
| 14. | Respondents failed to disclose to investors that Euro was a public company trading on the OTCBB for significantly less than $0.50 per share. In fact, Respondents misrepresented to investors that Respondents were the exclusive means by which investors could purchases shares of Euro and that Euro was going to become a public company in the near future. |
| 15. | Moreover, Respondents did not provide investors with a private placement memorandum or any other offering document that disclosed the risks associated with a purchase of Euro Restricted Shares. For example, Respondents did not disclose to investors that Euro Restricted Shares were not very liquid or that Euro Restricted Shares were not registered under the Act. |
| 16. |
At no time relevant hereto was Maxcom registered in Connecticut as a broker-dealer, nor was Maxcom exempt from such registration requirements. |
| 17. | At no time relevant hereto was Christoforou registered in Connecticut as an agent of a broker-dealer, nor was Christoforou exempt from such registration requirements. |
| 18. | At no time relevant hereto was Christoforou registered in Connecticut as an agent of issuer, nor was Christoforou exempt from such registration requirements. |
| 19. | The Euro Restricted Shares that were offered and sold by Respondents were not registered in Connecticut under Section 36b-16 of the Act, nor were they exempt from registration under Section 36b 21 of the Act, nor were they covered securities. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE
a. Violation of Section 36b-6(a) of the Act by Maxcom –
Unregistered Broker-Dealer Activity
| 20. | Paragraphs 1 through 19, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 21. |
Maxcom transacted business as a broker-dealer in Connecticut absent registration, as more fully described in paragraphs 6 through 16, inclusive. Such conduct constitutes a violation of Section 36b-6(a) of the Act, which forms a basis for an order to cease and desist to be issued against Maxcom under Section 36b-27(a) of the Act, and for the imposition of a fine upon Maxcom under Section 36b-27(d) of the Act. |
b. Violation of Section 36b-6(a) of the Act by Christoforou –
Unregistered Broker-Dealer Agent Activity
| 22. | Paragraphs 1 through 21, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 23. |
Christoforou transacted business as a broker-dealer agent of Maxcom in Connecticut absent registration, as more fully described in paragraphs 7 through 17, inclusive. Such conduct constitutes a violation of Section 36b-6(a) of the Act, which forms a basis for an order to cease and desist to be issued against Christoforou under Section 36b-27(a) of the Act, and for the imposition of a fine upon Christoforou under Section 36b-27(d) of the Act. |
c. Violation of Section 36b-6(a) of the Act by Christoforou –
Unregistered Agent of Issuer Activity
| 24. | Paragraphs 1 through 23, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 25. |
Christoforou transacted business as an agent of issuer of Euro in Connecticut absent registration, as more fully described in paragraphs 7 through 18, inclusive. Such conduct constitutes a violation of Section 36b-6(a) of the Act, which forms a basis for an order to cease and desist to be issued against Christoforou under Section 36b-27(a) of the Act, and for the imposition of a fine upon Christoforou under Section 36b-27(d) of the Act. |
d. Violation of Section 36b-16 of the Act by Respondents –
Sale of Unregistered Securities
| 26. | Paragraphs 1 through 25, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 27. |
Respondents offered and sold securities in Connecticut to at least six investors, as more fully described in paragraphs 8 through 18, 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 Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act. |
e. Violation of Section 36b-4(a) of the Act by Respondents –
Fraud in Connection with the Offer, Sale or Purchase of any Security
| 28. | Paragraphs 1 through 27, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 29. |
The conduct of Respondents, as more fully described in paragraphs 8 through 15, 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 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 Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act. |
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, Maxcom has committed at least one violation of Section 36b-6(a) of the Act, at least one violation 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, Christoforou has committed at least one violation of Section 36b-6(a) of the Act, at least one violation 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 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 each Respondent;
WHEREAS, the Commissioner ORDERS that MAXCOM CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, (1) transacting business as a broker-dealer in Connecticut absent registration, (2) offering and selling unregistered securities, and (3) 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 as a fraud or deceit upon any person;
WHEREAS, the Commissioner ORDERS that CHRISTOFOROU CEASE AND DESIST from directly or indirectly violating the provisions of the Act, including without limitation, (1) transacting business as a broker-dealer agent in Connecticut absent registration, (2) transacting business as an agent of issuer in Connecticut absent registration, (3) offering and selling unregistered securities, and (3) 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 as a fraud or deceit upon any person;
THE COMMISSIONER FURTHER ORDERS THAT, pursuant to subsections (a) and (d) of Section 36b-27 of the Act, 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. The enclosed Appearance and Request for Hearing Form must be completed and mailed 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”. Once a written request for a hearing is received, the Commissioner may issue a notification of hearing and designation of hearing officer that acknowledges receipt of a request for a hearing, designates a presiding officer and sets the date of the hearing in accordance with Section 4-177 of the General Statutes of Connecticut and Section 36a-1-21 of the Regulations. If a hearing is requested, the hearing will be held on March 5, 2013, 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.
This Order to Cease and Desist shall remain in effect and become permanent against any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
The Commissioner may order that the maximum fine be imposed upon any Respondent that fails to request a hearing within the prescribed time period or fails to appear at any such hearing.
| Dated at Hartford, Connecticut, | ________/s/________ | |
| this 21st day of December 2012. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 21st day of December 2012, the foregoing Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing was sent by certified mail, return receipt requested, to Maxcomusa Group Inc., 61 Fair Street, Norwalk, Connecticut 06851, certified mail no. 7011 0470 0002 2573 4773; and Christos Christoforou, 61 Fair Street, Norwalk, Connecticut 06851, certified mail no. 7011 0470 0002 2573 4780.
| ______/s/__________ | |
| Elena Zweifler | |
| Prosecuting Attorney |