Owners of Tinton Falls Broker-Dealer Agree to Pay $2.1M Restitution, Penalties for Violating
Attorney General Christopher S. Porrino and the Division of Consumer Affairs today announced that a couple and the companies they own in Monmouth County have agreed to pay $2.1 million – including $1.8 million in investor restitution - to settle legal actions brought against them by the Bureau of Securities for multiple violations of New Jersey’s securities laws.
Anthony J. Cantone and Christine L. Cantone agreed to the terms with the Bureau, set forth in two documents, to resolve actions against them and the investment companies they own in Tinton Falls – Cantone Research, Inc. (“CRI”) and Cantone Office Center, LLC (“COC”).
As stated in an Administrative Consent Order, the Bureau found that the defendants engaged in dishonest or unethical practices in selling securities – in the form of certificates of participation – to more than 170 investors.
These investors put up $4.7 million to invest in loans, in the form of promissory notes, taken out by a developer for a planned 186-unit condo complex in Orlando called Esplanade at Millennia Condominiums.
According to the settlement documents, the defendants did not alert investors to facts they were entitled to know before they bought the certificates, including that the developer who guaranteed their investments was highly leveraged and that the securities they purchased were neither registered nor exempt from registration with the Bureau, meaning that they could not legally be offered to investors. The developer eventually defaulted on the investment loans for the project.
According to the Administrative Consent Order, from 2005 through 2007, Anthony Cantone, through CRI, sold certificates of participation (COP) in subordinated promissory notes, totaling nearly $8 million. Cantone Office Center, LLC had purchased the promissory notes from Esplanade Development, LLC, owned by Robert A. Crowder, which was seeking to build condominiums in Orlando, Florida.
Anthony Cantone is President and CEO of broker-dealer CRI, and was registered by the Bureau as an agent and investment adviser representative at CRI. He also is Managing Member of COC. Christine Cantone is Vice President and was Chief Compliance Officer of CRI when the scheme was ongoing, and was registered by the Bureau as an agent at CRI.
In a Confidential Disclosure Memoranda (CDM) to potential investors, the defendants had stated that Crowder personally guaranteed payment on the certificates of participation, but the CDM did not accurately disclose Crowder’s net worth or his tenuous financial state.
Potential investors were not told that in 2006, Crowder defaulted on a $2.6 million promissory note COC had purchased in 2005. Nor were they informed that in 2006, Anthony Cantone provided a $1 million bridge loan to Crowder that was used to hide the default on the 2005 note and pay the interest income owed to the 2005 investors. It was further undisclosed to investors that in 2007 COC lent the developer an additional $5.1 million. Esplanade Development LLC, eventually defaulted on the promissory notes and Crowder failed to honor his guaranty.
The Bureau found that the activities of the Cantones and CRI constituted dishonest or unethical practices in the securities business. In addition, Christine L. Cantone, who served as the firms’ compliance officer, did not provide adequate supervision of Anthony Cantone’s activities, the Bureau found.
Under terms of the Consent Order and Final Judgment resolving an action by the Bureau against the defendants in Superior Court, the Cantones and their companies must pay $1.8 million in restitution to investors, and pay a $300,000 civil penalty. In the Administrative Consent Order, Anthony and Christine Cantone agreed to a suspension of over 18 months of their registrations with the Bureau. They also agreed to the engagement of an independent consultant to review, assess and provide recommendations as to certain aspects of CRI’s business; and Anthony and Christine agreed not to act in a supervisory capacity.
The Bureau of Securities is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. It is critical that investors “Check Before You Invest.” Investors can obtain information, including the registration status and disciplinary history, of any financial professional doing business to or from New Jersey, by contracting the Bureau toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600, or by visiting the Bureau’s website at www.njsecurities.gov. Investors can also contact the Bureau for assistance or to raise issues or complaints about New Jersey-based financial professionals or investments.