Connecticut Department of Banking Securities Bulletin Fall 2023

State of Connecticut
Department of Banking

Securities and Business Investments Division Securities Bulletin

Vol. XXXVII No. 3 - Fall 2023

Features

Quarterly Statistical Summaries

Enforcement and Other Highlights

Administrative Actions

Consent Orders

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Administrative Actions

Burns Capital Investments LLC and Thomas Zachary Burns

On September 18, 2023, the Banking Commissioner issued an Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Matter No. CRF-23-2022246-S) against Burns Capital Investments LLC and Thomas Zachary Burns, now or formerly of 1401 Windsor Station Drive, Windsor, Connecticut 06095.

The action alleged that Respondents violated Section 36b-16 of the Connecticut Uniform Securities Act by offering and selling unregistered interests in a cryptocurrency investment pool managed by Respondents. From approximately December 2021 through August 2022, Respondents purportedly raised at least $148,000 from at least nine investors located in various states, including Connecticut. In addition, the action alleged that Respondents violated Section 36b-4 of the Act by engaging in fraudulent and dishonest or unethical practices in connection with the sales. More specifically, Respondents purportedly led investors to believe that Burns Capital Investments LLC was a cryptocurrency investment firm; that Respondents used artificial intelligence to trade on the investors’ behalf; that Burns held a patent for the artificial intelligence; and that Burns Capital Investments LLC was licensed and regulated by the “State of Connecticut Money Transmitter Licensing Division” and by FinCEN. In reality, Burns commingled some of the investors’ money with his own and diverted some investor funds for his personal use. In addition, the action claimed that Respondents did not have any patent for artificial intelligence, and that Burns Capital Investments LLC was not licensed and regulated by the Commissioner under Sections 36a-595 to 36a-612, inclusive, of the General Statutes of Connecticut governing money transmitters, or by FinCEN.

The action also alleged that Respondent Burns, individually and under the auspices of Burns Capital Investments LLC, transacted business as an unregistered investment adviser in violation of Section 36b-6(c)(1) of the Act, that Respondents violated Section 36b-5 of the Act by engaging in fraudulent, dishonest or unethical practices in connection with their advisory activity; and that Respondents violated section 3b-23 of the Act by making materially false or misleading statements in connection with an agency investigation.

The Respondents were afforded an opportunity to request a hearing on the allegations in the action.

Blackstone Wealth Solutions LLC, Paul Brian Kopman (CRD No. 2482456) and Matthew Craig Hults (CRD No. 3196510)

On August 16, 2023, the Banking Commissioner issued three separate Orders Imposing Fine (Matter No. CRF-23-202114-S) against Blackstone Wealth Solutions LLC , a purported precious metals dealer located at 13750 West Colonial Drive, Suite 360, Winter Garden, Florida 34787, Paul Brian Kopman , Chief Executive Officer of the firm, and Matthew Craig Hults , the firm’s President. Blackstone Wealth Solutions LLC is currently inactive. The Orders Imposing Fine were rendered by default, with each Respondent directed to pay a $100,000 penalty.

The Orders Imposing Fine had been preceded by a May 23, 2023 Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (Matter No. CRF-23-202114-S) against all three Respondents. The May 23, 2023 action alleged that beginning in 2019, Kopman and Hults convinced an elderly Connecticut investor to entrust the investor’s funds to them for the purpose of investing. Ultimately, without the investor's knowledge or authorization, over $300,000 of the investor's money was transferred from the investor’s securities brokerage account to a business account under the control of Blackstone Wealth Solutions LLC. Kopman purportedly impersonated the investor in facilitating the transfer of funds from the brokerage firm. When the investor later confronted Kopman, Kopman claimed that he had invested the withdrawn sums in silver, but was unable to provide the investor with proof that such investments had, in fact, been made. In addition, Respondents allegedly failed to return the investor’s funds.

Since none of the Respondents requested a hearing on the Order to Cease and Desist or the Order to Make Restitution, those orders became permanent as to Respondents Blackstone Wealth Solutions, LLC and Matthew Craig Hults on July 12, 2023 and as to Respondent Paul Brian Kopman on June 14, 2023.

Adopting as findings the allegations in the May 23, 2023 action, the Commissioner found that each of the three respondents violated the antifraud provisions in Section 36b-5(a) of the Connecticut Uniform Securities Act and engaged in dishonest or unethical practices in contravention of Section 36b-5(f) of the Act. The Commissioner also found that Respondent Blackstone Wealth Management, LLC transacted business as an unregistered investment adviser in violation of Section 36b-6(c) of the Act and that Respondents Kopman and Hults violated Section 36b-6(c)(2) of the Act by transacting business as unregistered investment adviser agents.

Vend Tech International, Inc.

On July 18, 2023, the Banking Commissioner issued a Notice of Intent to Issue Stop Order Denying Effectiveness to a Business Opportunity Postsale Registration, Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (No. CSF-23-2022-42-B) against Vend Tech International, Inc. of 2475 George Urban Boulevard, Depew, New York 14043. The Respondent is in the business of offering vending machine business opportunities under the brand names “Naturals2GO” and “All4U.”

The action alleged that, commencing in 2014, the Respondent sold unregistered vending machine business opportunities to several Connecticut residents in violation of Sections 36b-62(a) and 36b-67(1) of the Connecticut Business Opportunity Investment Act. Seven years after the first sale, the Respondent filed to register the business opportunity after-the-fact. The action alleged that, while that application was pending, the Respondent made yet another unregistered Connecticut sale which it did not disclose to the agency. Such nondisclosure, as well as the Respondent's failure to disclose business opportunity related sanctions levied against it by the states of Illinois, Washington and Maryland in 2021 and 2022 allegedly violated Section 36b-62(d) of the Act. The action also alleged that the Respondent violated Section 36b-63 of the Act by failing to provide prospective purchaser-investors with a disclosure document meeting the requirements of the Act. In addition, the action alleged that the Respondent used misleading materials in promoting its business opportunity to prospective purchasers in violation of Section 36b-67 of the Act.

Vend Tech International, Inc. was afforded an opportunity to request a hearing on the allegations in the action.

NYPPEX, LLC (CRD No. 47654) and Laurence Geoffrey Allen (CRD No. 1063970)

On July 3, 2023, the Banking Commissioner entered Findings of Fact, Conclusions of Law and an Order (Docket No. NDR-20-14445-S) against NYPPEX, LLC, an applicant for broker-dealer registration under the Connecticut Uniform Securities Act, and Laurence Geoffrey Allen, managing member of the firm. The Order was entered by default since the Respondents failed to appear at the scheduled hearing. NYPPEX, LLC, formerly of 55 Old Field Point Road, Greenwich, Connecticut, is now based at 120 N. Washington Square, Suite 200, Lansing, Michigan 48933.

The July 3, 2023 action had been preceded by a December 7, 2022 Amended Notice of Intent to Deny Registration as Broker-dealer, Amended Notice of Intent to Deny Registration as a Broker-dealer Agent and Amended Notice of Right to Hearing (Docket No. NDR-20-14445-S) alleging that several disciplinary events against the Respondents and involving charges of fraud supported denial of their pending registrations. These included 1) a February 4, 2021 permanent injunction obtained by the New York Attorney General against the Respondents, which injunction was later upheld by the New York Court of Appeals (James, AG SNY v Allen, N.Y. App. Div., 198 A.D.3d 531 (1st Dep’t 2021)); 2) an August 26, 2022 FINRA Extended Hearing Panel Decision expelling NYPPEX from FINRA membership and barring Allen from associating with any FINRA member firm in any capacity (FINRA Disciplinary Proceeding No. 2019064813801); and 3) a May 13, 2022 Final Order of Default entered by the State of Kentucky revoking NYPPEX’s broker-dealer registration in that state.

Since the Respondents failed to appear at the scheduled hearing, the allegations against them in the Amended Notice were deemed admitted. Accordingly, the Commissioner found that grounds existed under Sections 36b-15(a)(2)(D) and 36b-15(a)(2)(F) of the Act for denying the firm’s broker-dealer registration in Connecticut and the registration of Respondent Allen as an agent of the firm.

The Order provided that the registration denials would become effective on July 5, 2023, the mailing date of the Order.

Consent Orders

Robinhood Financial LLC (CRD No. 165998)

On August 10, 2023, the Banking Commissioner entered a Consent Order (No. CO-23-202024-S) with respect to Robinhood Financial LLC, a Connecticut-registered broker-dealer located at 500 Colonial Center Parkway, Suite 100, Lake Mary, Florida 32746. The Consent Order was an outgrowth of a multistate investigation into the firm's retail securities market activities between October 1, 2019 and March 2021. Specifically, the investigation focused on platform outages, deficiencies in the supervision of options and margin trading eligibility and approval processes, and deficiencies relating to the firm's operational structure for controls and customer service.

The Consent Order alleged that the firm violated Section 36b-31-6f(b) of the Regulations under the Connecticut Uniform Securities Act by failing to establish, enforce and maintain an adequate supervisory system that would ensure compliance with applicable securities laws. In particular, Robinhood Financial LLC 1) failed to maintain adequate oversight of its trading technology, resulting in significant platform outages during times of historic market volatility; 2) failed to maintain an adequate customer response system while it was experiencing platform outages; 3) failed to exercise due diligence when evaluating Connecticut customers' qualifications for options and margin trading; 4) negligently misrepresented risks associated with multi-leg spread options; 5) failed to report thousands of complaints to the Financial Industry Regulatory Authority (FINRA); and 6) failed to provide reasonable customer support.

The Consent Order ordered the firm to cease and desist from violating Section 36b-31-6f(b) of the Regulations and directed that it pay a $200,000 fine to the department, representing Connecticut's proportionate share of the multistate settlement.

Statistical Summary

Licensing At A Glance

at the end of the quarter

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Broker-dealers Registered

2,020

2,013

2,009

Broker-dealer Agents Registered

203,752

206,403

208,630

Broker-dealer Branch Offices Registered

2,314

2,357

2,334

Investment Advisers Registered

429

430

425

SEC Registered Advisers Filing Notice

2,476

2,484

2,522

Investment Adviser Agents Registered

15,400

15,260

15,344

Exempt Reporting Advisers

180

186

193

Agents of Issuer Registered

1

1

1

Conditional Registrations

0

0

0

Securities and Business Opportunity Filings

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Offerings Reviewed

27

19

26

72

Investment Company Notice Filings

430

405

403

1,238

Exemptions and Exemptive Notices

1,376

1,425

1,333

4,134

Examinations

Broker-dealers

17

15

13

45

Investment Advisers

13

11

15

39

Securities Investigations

Opened

9

8

14

31

Closed

2

9

13

24

Ongoing as of End of Quarter

94

95

94

Subpoenas issued

13

7

8

28

Matters referred from Attorney General

0

0

1

1

Matters referred from Other Agencies

0

0

0

0

Business Opportunity Investigations

Investigations Opened

0

0

0

0

Investigations Closed

0

0

0

0

Ongoing as of End of Quarter

1

1

1

Enforcement: Remedies and Sanctions

Notices of Intent to Deny (Licensing)

0

0

0

0

Notices of Intent to Suspend (Licensing)

0

0

0

0

Notices of Intent to Revoke (Licensing)

0

0

0

0

Denial Orders (Licensing)

0

0

1

1

Suspension Orders (Licensing)

0

0

0

0

Revocation Orders (Licensing)

0

0

0

0

Notices of Intent to Fine

0

2

2

4

Orders Imposing Fine

0

0

3

3

Cease and Desist Orders

0

2

2

4

Notices of Intent to Issue Stop Order

0

0

1

1

Activity Restrictions/Bars

3

2

0

5

Stop Orders

0

0

0

0

Vacating/Withdrawal/ Modification Orders

0

0

0

0

Restitutionary Orders and Disgorgement Orders

1

2

1

4

Injunctive Relief Obtained

0

0

0

0

Proceedings and Settlements

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Administrative Actions

0

2

4

6

Consent Orders

4

5

1

10

Stipulation and Agreements

1

2

0

3

Monetary Relief*

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Monetary Sanctions Imposed

$629,868

$47,750

$500,000

$1,177,618

Portion attributable to settlements

$629,868

$47,750

$200,000

$877,618

Attributable to Court-Ordered Penalties

0

0

0

0

Financial Literacy Contribution

0

0

0

0

Restitution or Other Monetary Relief ( includes rescission offer amounts )

$551,959

$224,541

$138,146

$914,646

Cents eliminated

Securities Referrals

1st
Quarter

2nd
Quarter

3rd
Quarter

4th
Quarter

Year to Date

Criminal Matters

0

0

0

0

Civil (Attorney General)

1

0

1

2

Other Agency Referrals

0

0

0

0