By NEIL HARTNELL
Tribune Business Editor
A Bahamas-based broker/dealer yesterday accused US federal regulators of “doing everything in their power to harm” its business through a six-year probe it branded as “a sham”.
Guy Gentile, principal of Swiss America Securities, told Tribune Business that being investigated by the US Securities & Exchange Commission (SEC) “would affect any business” as he accused the capital markets overseer of harassment by pursuing a long-running vendetta against him.
“US SEC interference would affect any company. I don’t know how it will impact us but I truly believe the SEC is doing everything in their power and not in their power to harm me and the company,” Mr Gentile told Tribune Business in an e-mailed reply yesterday.
Legal documents obtained by Tribune Business reveal that the SEC is probing whether Mr Gentile and his broker/dealer business, which is based in the Elizabeth on Bay Plaza off Bay Street, have been soliciting US clients without the necessary US approvals.
It is seeking to obtain information from Mr Gentile’s Florida attorney and alleged associates to determine whether Swiss America Securities and its affiliates have been operating as “an unregistered broker/dealer” in the US – a charge he vehemently denies.
The Swiss America chief, in response, is urging the US federal courts to halt the SEC investigation because it is “an abuse of process” – based on a Formal Order of Investigation (FOI) issued in 2013 that relates to a case seemingly closed five years ago.
Mr Gentile is arguing that the SEC has produced no evidence linking him or his companies to that case, or shown that there is any likelihood they are about to violate US securities laws.
Alleging that the SEC action is “retaliation” for declining to continue co-operation with it as an informant, Mr Gentile said the regulator’s tactic of issuing subpoenas to Swiss America’s counterparties to obtain information had cost the Bahamian broker/dealer banking and clearing and settlement relationships with major financial institutions.
The filings seen by this newspaper show the SEC twice requested assistance from The Bahamas’ own regulator, the Securities Commission, in investigating Swiss America during 2017. This occurred one year before the broker/dealer separately paid a $120,000 fine to the Securities Commission to settle alleged regulatory breaches in its customer due diligence and record-keeping procedures.
The SEC, meanwhile, confirmed the existence of its long-running investigation into Swiss America and Mr Gentile by launching a February 6, 2019, action in the southern Florida federal court.
It wants the court to compel a Florida-based company, Mintrade Technologies, and its principal, Nicholas Abadiotakis, to obey a subpoena and hand over information on Mr Gentile, his Bahamian broker/dealer and its affiliate, SureTrader. Both are presently refusing to do so, citing legal obstacles and claims that the documents requested fall outside the scope of the SEC’s investigation.
“The Commission has been investigating Swiss America Securities, doing business as SureTrader and MintBroker International, a Bahamas-based broker/dealer registered with the Securities Commission of the Bahamas but not registered to act as a broker/dealer in the United States, and its owner, Guy Gentile, in
connection with potential ongoing violations of the federal securities laws,” the SEC’s court filings alleged.
“Issues central to the potential violations include whether Swiss America’s customers include United States residents, the solicitation of US customers, and the movement of customer funds.”
Mr Gentile vehemently denied that Swiss America Securities and/or its affiliates solicit US clients, yet this did not stop the SEC alleging: “SureTrader, a Bahamian broker/dealer, is not registered as a broker/dealer in the United States. Nor is its chief executive, Guy Gentile.
“However, at least one-half of SureTrader’s clients are United States residents and it employs more than 50 ‘experienced employees’, servicing more than 20,000 clients and processing over 12,000 trades per day.”
The SEC alleged that both Mintrade Technologies and Mr Abadiotakis were connected to Swiss America, the latter having worked for another of Mr Gentile’s affiliates. But it did not take the Bahamian broker/dealer’s principal long to respond in a bid to quash the regulator’s probe and its subpoenas once and for all.
Mr Gentile, in an action filed just two days later in the New Jersey federal court, claimed that the SEC was pursuing a vendetta against himself and his Bahamian businesses after he stopped acting as an informant for it in 2015.
He suggested that the regulator’s actions were also motivated by his success in defeating both criminal and previous SEC actions launched against him in the same New Jersey court, which were dismissed on legal technicalities.
Mr Gentile suggested that his public criticisms of the SEC, and “whistleblowing” against one of its employees, may also have sparked the long-running investigation – which he only learned about more than two years after it was initiated, and at a time when he was working as an informant for the same regulator.
“Guy Gentile brings this action for declaratory and injunctive relief to prevent the Commission…. from continuing to abuse its
investigatory process, and the process of the federal courts, by conducting a six-year sham ‘investigation’ into him and his Bahamian broker/dealer,” he and his attorneys alleged in court filings.
“This investigation out of the Miami regional office of the SEC has been undertaken without a Formal Order of Investigation (FOI) authorising the staff to investigate Mr Gentile or his broker/dealer, making the entire investigation improper and requiring all outstanding subpoenas issued under it and evidence collected to date to be quashed.”
Mr Gentile’s legal filings claim the FOI being used by the SEC relates to the sale of securities in a Florida company called Traders Café. He alleges neither himself, nor his Bahamian businesses, had any connection to this, with the investigation into that company ending in 2014.
“The Commission’s conduct has continued to violate Mr Gentile’s statutory rights, and over the past three-and-a-half years has had the effect of damaging Mr Gentile’s ability to earn a living. Several banks and vendors have stopped doing business with Mr Gentile as a result of receiving these subpoenas,” the Swiss America chief and his attorneys allege.
“During or prior to September 2017, Citibank and Key Bank, institutions where Mr Gentile routinely conducted banking for his broker/dealer business, also received subpoenas ‘In the matter of Traders Café’.
“As a result of receiving the SEC subpoenas, both banks decided to close all bank accounts related to Mr Gentile. The fact that those accounts were closed seriously compromised Mr Gentile’s ability to run his broker-dealer establishments,” the lawsuit continued.
“The subpoenas sent to individuals and banks associated with Mr Gentile have caused significant harm to him and his companies. By way of limited example, after the SEC served a subpoena on Checkbook.com (a company that handles SureTrader’s clearing and settlement) in May 2017, Checkbook.com notified SureTrader that they will no longer be able to process payment transactions and that the decision was made due to ‘compliance’ and ‘risk’.”
Mr Gentile built his Bahamian broker/dealer business while co-operating with the SEC’s New Jersey office during the period 2012 to 2015. However, in 2014, the regulator’s Miami station “surreptitiously” began investigating him by “leading him to believe” he was co-operating with it.
He was only informed that he was the target in March 2016, when the SEC’s Miami office revealed it was planning to file a civil complaint against him “for violating securities laws on a theory that ‘the foreign broker/dealer exemption has been blown’ based on allegations that his broker/dealer was soliciting United States customers”.
“In March 2016, the SEC staff asserted that the SEC was in possession of ‘new evidence’ which they claimed supported a finding of a violation of the anti-solicitation regulations by Mr Gentile’s Bahamian broker-dealer, SureTrader,” the Swiss America chief’s lawsuit alleged.
“Mr Gentile’s Bahamian broker/dealer does not solicit United States customers. All of its advertisements on the Internet explicitly state that the advertisement is not intended for US persons, and the broker-dealer’s website contains a pop-up blocker which blocks anyone with a US Internet IP address and requires anyone who wishes to enter the site to confirm that they are not a United States citizen and have not been solicited.
“The SEC staff was told that FINRA (the regulatory body that oversees broker/dealers) had previously initiated an investigation into whether the Bahamian broker/dealer was soliciting US clients the prior year, and had concluded its investigation by determining that the broker/dealer was in compliance with all regulations regarding the registration of broker/dealers and anti-solicitation laws based on the company’s demonstrated policies and practices,” the action continued.
“The SEC staff was also told that Mr Gentile was a government co-operator for the prior three years, that the FBI and SEC knew everything about his business and its practices, that the FBI was in the office of the Bahamian broker/dealer on numerous occasions, and had informed Mr Gentile that he should continue to operate his business as he had been.”
The SEC, though, continued to subpoena counterparties dealing with Swiss America in its search for evidence before confirming, on May 9, 2017, that it was conducting a “non-public” investigation of Mr Gentile’s Bahamian businesses.
This saw the US regulator, on July 21 and September 27 that year, seek assistance from the Securities Commission of The Bahamas in obtaining documents from SureTrader. The latter complied with both requests.
Mr Gentile has enjoyed a somewhat colourful career in the Bahamas, with Tribune Business reporting in 2016 how he and his broker/dealer 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, including the now-closed Sur Club Sushi Bar, 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 more recently 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.