By NEIL HARTNELL
Tribune Business Editor
Attorneys for the principal of a Bahamas-based broker/dealer yesterday slammed smears that brand him "a connoisseur of scams" as "false and defamatory".
Legal representatives for Guy Gentile, head of Bay Street-based Swiss-America Securities, said his accusers had already backed down from many of the initial claims made in a lawsuit filed with the southern New York district court on August 13, 2018.
Avalon Holdings Corporation, a company listed on the New York Stock Exchange's (NYSE) Amex market, first claimed that Mr Gentile and Swiss-America, now renamed as MintBroker International, had led a conspiracy to seize control of the company's stock for the purposes of conducting "a pump and dump scheme" - a simple form of securities fraud.
The company alleged that Mr Gentile and MintBroker, together with the assistance of unnamed conspirators, breached US securities industry disclosure laws by failing to inform the market of their increasing control of Avalon's stock.
The alleged Gentile-led group at one point owned 60 percent of Avalon, and the company said of the claimed non-disclosure: "These are not mere technical failings but a deliberate and calculated concealment by the defendants of their purchases and sales of [Avalon's] common stock within periods of less than six months."
Seemingly seeking to irreparably damage the Swiss-America Securities principal's reputation, Avalon's lawsuit then alleged: "Guy Gentile is an experienced securities market operator and a connoisseur of scams."
It made much of the recent lawsuits launched against Mr Gentile by both the US federal authorities and capital markets regulators, both of which were dismissed - without any appeal - by the US courts.
Adam Ford, Mr Gentile's US-based attorney, told Tribune Business of the Avalon claims: "The allegations are knowingly false and defamatory." He and Mr Gentile declined to comment further, given that the lawsuit is still live before the New York court, but hinted at their belief that the character attacks on the Swiss-America Securities principal were motivated by a desire to pressure him into an early, unfavourable financial settlement.
In a rambling 14-page lawsuit that at one point lapsed into Greek mythology, Avalon alleged that Mr Gentile owned Mintbroker International "either directly or through" Swiss-America Securities, given that its main offices shared the latter's address at Elizabeth and Bay Streets in downtown Nassau.
Mintbroker's trading activities were compared to "Athena bursting forth from the head of Zeus fully formed", but Avalon's latest legal filings reveal it has already mounted a major legal climbdown.
The company, in a move approved by the New York court, is dropping the conspiracy/non-disclosure/ and "pump and dump scheme" claims, and only persisting with the argument that Mr Gentile should relinquish more than $5m in estimated "swing-trade" profits from his trading in Avalon's stock.
Despite receiving a major concession before even filing their defence, Mr Gentile's legal battles are far from over. For he is fighting on another front - this time against the Puerto Rico financial services regulator's rejection of his application for a banking licence in that territory.
Mr Gentile and his Mint Bank International, in legal documents obtained by Tribune Business, are alleging that the Office of the Commissioner of Financial Institutions of Puerto Rico's (OCFI) denial of their application violates his "rights to freedom of expression and freedom of speech" under the US constitution.
They claim that the OCFI's assertion that Mr Gentile "lacked 'business integrity'" was based on irrelevant factors, namely his public criticisms of the US federal government over the two lawsuits against him that were dismissed on technical grounds because they were time barred.
The Swiss-America chief also alleged that the OCFI ignored these lawsuits' respective dismissals, and seemingly found that being charged by the US government was good enough to reject the bank licence application despite being declared innocent.
However, the OCFI's decision states that it was Mr Gentile's failure to fully disclose his past battles with the US government - not these fights themselves - that persuaded them to reject the bank licence.
Touting his success in the financial services industry, Mr Gentile recalled in his legal filings how he entered the Bahamas in December 2011 with the creation of his SureTrader broker/dealer.
That company is now part of the renamed MintBroker business, and Mr Gentile alleged: "MintBroker, which at one point had almost 75 employees, currently has over 50 employees, and has established itself in a short amount of time as one of the most well-respected and largest broker/dealers in the Bahamas.
"Gentile has never received a single customer complaint related to his financial services (or any other) work..... The SureTrader division of MintBroker has enjoyed significant success. In less than a year of operation under Gentile's leadership, it reported more than 100,000 equity transactions. The success of the division prompted a major expansion to meet scaling demands and the division was set to increase staff by 200 percent during March 2012. By 2012, SureTrader was ranked among Barron's top online brokers."
The Puerto Rican OCFI has subsequently moved to persuade the courts to dismiss Mr Gentile's claim, something the broker/dealer chief is pushing back against.
Mr Gentile and Swiss-America Securities are no strangers to run-ins with regulators, both in the Bahamas and the US. The broker/dealer has just agreed to pay a $120,000 fine as part of an August 30 settlement with the Securities Commission of the Bahamas (SCB) over the findings of a May 2016 inspection of its books and records.
"During May 2016 the Commission conducted an inspection for cause and discovered breaches further outlined in the report," the settlement agreement said.
"The issues revealed in the report primarily concerned Swiss-America Securities' operations and the failure to ensure full compliance with the provisions of the Act, including KYC (Know Your Customer) issues, maintenance of books and records, and failing to notify the Commission of material changes."
The Securities Commission's report was based on its examination of Swiss-America Securities' records, and interviews with its employees. The regulator said the violations of Bahamian securities laws were "contrary to the public interest", and that Mr Gentile's company "accepts responsibility for its non-compliance."
The fines were spread over 10 failings, which included not verifying client accounts; not conducting KYC and risk monitoring of clients; failing to provide details on insurance coverage and an outsourcing agreement; and not notifying the Securities Commission of its name change and Mr Gentile's involvement as defendant in a criminal case in the US.
Mr Gentile has enjoyed a somewhat colourful stay in the Bahamas, with Tribune Business reporting in 2016 how he and his broker/dealer, based in the Elizabeth on Bay Plaza on Bay Street, were allegedly used as "bait" by the Federal Bureau of Investigations (FBI) to help snare numerous international securities fraudsters.
He claimed that he and his Bahamian businesses were "forced" to play key roles in undercover 'sting' operations targeting criminals earning millions of dollars from market manipulation scams.
Their participation even extended to the 'bugging', both by video and sound, of Swiss-America's Bahamian head office in a successful bid to gain evidence against a Canadian fraudster who subsequently pleaded guilty to the charges against him.
Mr Gentile also attracted international media coverage after his Russian-born, model girlfriend, Kristina Kuchma, 24, in a fit of rage drove his Mercedes S400 hybrid into the pool at his Ocean Club home after he ended their 18-month relationship by text and allegedly reneged on a promise to provide $50,000 for one of her business ventures.