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IN THE MATTER OF: FIRST FINANCIAL LLC
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ORDER TO CEASE AND DESIST NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING DOCKET NO. CF-13-7985-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 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 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. | FFL is a Connecticut limited liability company formed in 2003 with its principal places of business last known to the Commissioner at 49 Rose Street #309, Branford, Connecticut 06405, and 25 Lorenz Drive, Wolcott, Connecticut 06716. |
| 7. | Sharif is an individual whose addresses last known to the Commissioner are 49 Rose Street #309, Branford, Connecticut 06405; and 25 Lorenz Drive, Wolcott, Connecticut 06716. Sharif is the managing member of FFL. FFL is currently run from Sharif’s residences at 49 Rose Street #309, Branford, Connecticut 06405, and 25 Lorenz Drive, Wolcott, Connecticut 06716. |
III. STATEMENT OF FACTS
| 8. | From at least January 2007 to the present, Sharif, alone and under the auspices of FFL, pooled investor funds for the purported purpose of investing such funds in an account managed by FFL and Sharif. Sharif, through FFL, raised money in or from Connecticut from at least 80 investors (“Investors”). |
| 9. | For all relevant periods, Sharif was the sole manager/member of FFL. Sharif informed the Investors that he would invest their money, along with a group of other individuals, in an investment pool. Sharif, in order to entice prospective participants, guaranteed monthly and yearly returns of 1% to 15% on investments in the pool. |
| 10. | The Investors did not have any input into how the money was going to be managed and Sharif controlled all investment decisions. |
| 11. | The Investors believed, because of Sharif’s misrepresentations, that Sharif was investing their money in established securities in a safe investment generating exceptional rates of return. In reality, Sharif commingled the Investors’ money into a single account in the name of FFL, invested some money in two futures accounts, paid off earlier Investors with later Investors’ money, and diverted some of the Investors’ money for his personal use. |
| 12. | To hide his conduct, Sharif in many instances created and provided some Investors with fictitious account statements, printed on FFL letterhead, reflecting the amount of each Investor’s investment and purported profits. These account statements contained falsified account balances which were greatly inflated from the Investors’ actual account balances. |
| 13. | Sharif also gave some Investors documents purporting to be statements from a futures commission broker, which provides traders with access to electronic futures markets, for an account in the name of FFL. In reality, the futures commission broker statements the Investors received did not come from the futures commission broker, but were created and provided to the Investors by Sharif and contained falsified account balances which were greatly inflated from the actual account balances. |
| 14. | The Investors continued to invest with Sharif after receiving the falsified FFL account statements and the purported futures commission broker statements that were actually created and provided to the Investors by Sharif. |
| 15. | The investment pool interests offered and sold by Respondents were never 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 the subject of a filed exemption claim or claim of covered security status. |
| 16. |
Respondents used some of the money raised from selling the investment pool interests to pay off earlier Investors with later Investors’ money and diverted some of the Investors’ money for Sharif’s personal use. |
| 17. | Respondents failed to pay Investors the purported profits as represented, and failed to return all of the Investors’ principal investment in the investment pool. |
| 18. | Both FFL and Sharif failed to disclose, inter alia, any risk factors related to the investment, any financial information on FFL or Sharif, and/or that Respondents would use part of the Investors’ money for personal expenses and to pay off earlier Investors with later Investors’ money. Each of these omitted items was material to the Investors and prospective investors. |
IV. STATUTORY BASIS FOR ORDER TO CEASE AND DESIST
AND ORDER IMPOSING FINE
a. Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities
| 19. | Paragraphs 1 through 18, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 20. |
Respondents offered and sold unregistered securities in or from Connecticut to at least one investor, as more fully described in paragraphs 8 through 14, inclusive, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 15. 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. |
b. Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any Security
| 21. | Paragraphs 1 through 20, inclusive, are incorporated and made a part hereof as if more fully set forth herein. |
| 22. |
The conduct of Respondents, as more fully described in paragraphs 8 through 18, 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, Respondents have 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 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;
WHEREAS, the Commissioner ORDERS that Respondents 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;
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 of Connecticut State Agencies. If a hearing is requested, the hearing will be held on February 26, 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 3rd day of January 2013. | Howard F. Pitkin | |
| Banking Commissioner |
CERTIFICATION
I hereby certify that on this 3rd day of January 2013, 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 First Financial LLC at 49 Rose Street #309, Branford, Connecticut 06405, certified mail no. 7011 0470 0002 2573 4797; and 25 Lorenz Drive, Wolcott, Connecticut 06716, certified mail no. 7012 1010 0001 7317 3905; and Feisal Sharif at 49 Rose Street #309, Branford, Connecticut 06405, certified mail no. 7012 1010 0001 7317 3912; and 25 Lorenz Drive, Wolcott, Connecticut 06716, certified mail no. 7012 1010 0001 7317 3929.
| ____/s/___________ | |
| Paul A. Bobruff | |
| Prosecuting Attorney |