engaged in a scheme to conduct voluminous unauthorized trading in over 360 retail customer accounts as Global Arena Capital Corp., the New York broker dealer they were associated with at the time, was going out of business. This unauthorized trading allegedly generated over $2.4 million in unlawful markups, markdowns, and commissions for their firm and resulted in over $4 million in net losses for their customers. The complaint alleges that Engler, who indirectly owned and controlled Global, orchestrated the scheme, and Turney and Perez, who were registered representatives at Global, carried it out with the assistance of Desiderio, Global's President, CCO and supervisor.
Awad, Gentile, Global Arena, HFP Capital, Byruch, Desiderio, Engler, Hagerman and Vaughan did not file with FINRA Office of Dispute Resolution properly executed Submission Agreements but are required to submit to arbitration pursuant to the Code of Arbitration Procedure ("Code") and are bound by the determination of the Panel on all issues submitted.
For Claimant Dolan Family Trust Account ("Claimant"): Hilton Wiener, Esq., Law Office of Hilton Wiener, New York, New York.For Respondent David Christopher Awad ("Awad"): Nathan W. Lamb, Esq., Ulmer & Berne LLP, Chicago, Illinois.For Respondent Joseph Gentile ("Gentile"): Harry Delagrammatikas, Esq., McCormick & O'Brien LLP, New York, New York.Respondent Global Arena Capital Corp. ("Global Arena") did not enter an appearance.Respondent HFP Capital Markets LLC ("HFP Capital") did not enter an appearance.Respondents Barbara Lucille Desiderio ("Desiderio"), Geoffrey Byruch ("Byruch"), Jonah Engler ("Engler"), Brian Joseph Hagerman ("Hagerman"), Michael David Tannen ("Tannen") and John Joseph Vaughan ("Vaughan") appeared pro se.
On November 2, 2018, the Panel requested that FINRA Office of Dispute Resolution schedule a telephonic pre-hearing conference call with the parties on December 5, 2018. FINRA sent a letter to the parties on November 2, 2018, confirming the conference set for December 5, 2018. On November 28, 2018, FINRA sent a courtesy reminder to the parties that the pre-hearing conference would be taking place on December 5, 2018.On December 5, 2018, the Panel held the pre-hearing conference with the parties to discuss the status of the case, as well as the scheduling of evidentiary hearing dates. No one appeared at the hearing on behalf of Claimant. Pursuant to the Chair's request, FINRA staff dialed out to Claimant's counsel twice, left a voicemail and sent an email, reminding Claimant's counsel to join the conference call. Claimant's counsel never returned the calls or email sent from FINRA staff and did not appear on the call. The Panel noted Claimant's lack of responsiveness and multiple postponements of the case. The Panel also noted that Claimant, despite numerous notifications of the December 5, 2018 pre-hearing conference, failed to appear for the pre-hearing conference.
After considering the pleadings, the testimony and evidence presented, the Panel has decided in full and final resolution of the issues submitted for determination as follows:The hearings in this case have been postponed several times and Claimant, despite numerous notifications, failed to appear for the December 5, 2018 prehearing conference. Accordingly, pursuant to Rule 12601(c) of the Code, this case is hereby dismissed without prejudice.
During the period November 2013 to June 2015 (the "relevant period"), Awad made material misrepresentations and omitted material facts in connection with securities transactions, churned and excessively traded customer accounts, and made unsuitable recommendations of securities. He thereby willfully violated Section 10(b) of the - - Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, and violated FINRA Rules 2020, 211 1, and 2010.
From November 2013 to June 2015 (the "relevant period"), Desiderio participated in a scheme to defraud customers in order to generate commissions and markups. instead of supervising brokers in the Sixth Avenue Branch, she allowed them to churn customer accounts. She provided instructions to inexperienced supervisors that caused the alerts generated by the firm's electronic compliance systems-which were purportedly designed to detect and prevent excessive trading-to be ignored and automatically approved. To allow the fraudulent scheme to continue, she made misstatements to customers and failed to provide documents and facts to FINRA Examination staff. She also made and permitted to be made false statements in response to FINRA's requests for documents and information. She also refused to appear for her scheduled testimony. Desiderio thereby willfully violated Section 10(b) ofthe Securities Exchange Act of 1 934 and SEC Rule 10b-5 promulgated thereunder, and violated F?NRA Rules 2020, 2010, 31 10, and 8210.
6. Between December 2009 and February 2011, Respondent and five other individuals fraudulently sold a total of nearly $3 million worth of Senior Secured Zero Coupon Notes (the "Notes" or the "MMM Notes") issued by Metals, Milling and Mining LLC ("MMM") in a private placement offering to 59 customers. Specifically, Respondent misrepresented material facts about the offering, which promised to pay a return of 100 percent in one year by purportedly extracting precious metals from materials left over from mining operations (known as "ore concentrate"). The investors lost all of the money that they invested in the MMM Notes, with the exception of three investors who were repaid with funds from new investors.7. Respondent recklessly failed to conduct a reasonable investigation of the viability and legitimacy of MMM in the face of numerous red flags that MMM was a fraud.8. In connection with his sales of MMM Notes, Respondent recklessly misrepresented that: (a) the MMM Notes were collateralized by certain barrels of ore concentrate; and (b) the ore concentrate that supposedly served as the collateral was of sufficient value to secure an investment in the MMM Notes. In fact, there was no collateral for the MMM Notes, because MMM did not own any ore concentrate, despite a misrepresentation in the MMM Notes that ownership of ore concentrate had been transferred to investors. Further, the ore concentrate that was supposed to serve as the collateral was nearly worthless. Respondent, having failed to confirm that the collateral existed and that the supposed collateral had any value, recklessly misrepresented to prospective purchasers that their investments would be adequately secured by collateral.9. Respondent recklessly misrepresented material facts regarding the MMM Notes to his customers, in willful violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and in violation of FINRA Rules 2020 and 2010.10. Further, Respondent failed to obtain basic information about MMM that was necessary to the due diligence process in order to understand an investment in the company. Without such information, Respondent lacked a reasonable basis to recommend the MMM Notes to investors, in violation of NASD Conduct Rule 2310 and FINRA Rule 2010.
During the period November 2013 to June 5,2015 (the "relevant period"), Tannen made material misrepresentations and omitted material facts in connection with certain securities transactions, churned and excessively traded customer accounts, and made unsuitable recommendations of securities. He thereby willfully violated Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, and violated FINRA Rules 2020,2111, and 2010.
Respondent is barred from associating with any FINRA member firm in any capacity for failing to appear and provide on-the-record testimony, in violation of FINRA Rules 8210 and 2010.