Avenir Financial Group, a brokerage firm headquartered in New York with approximately two dozen brokers operating from eight branch offices. The firm, along with Michael Clements and Karim Ahmed Ibrahim, were named in a FINRA Complaint where the Department of Enforcement has alleged that they have committed fraud via sale of promissory or equity notes, and where Clements personally aided and abetted the fraud. Department of Enforcement v. Avenir Financial Group, et al., No. 2015044960501 (Apr. 27, 2015).
According to the Complaint, the Department of Enforcement alleged that Avenir’s sales were mostly associated with elderly customers, and their capital raising prices (discussed below) have continued to occur. The Complaint indicated that from October to December of 2013, the firm had generated $348k from 4 investors, where the price charged for the equity positions had increased 19 fold in less than 1 month after the firm engaged in its first offering. The firm, according to the Complaint, was net capital deficient during its first two offerings and suspended from its securities business operations as a result. The firm reportedly would have become deficient in its 3rd offering had an investor not infused capital into the firm by the time the firm was facing a $196,000 margin call.
FINRA alleged in the Complaint that in November, 2013, Avenir had engaged in the fraudulent conduct via the 3rd offering. Specifically, Ibrahim, acting off of Clements’ direction, solicited a
92 year old firm customer for purposes of investing $250,000 for a 5% equity interest. According to the Complaint, the only document provided to the investor was a purchase agreement.
The Complaint further indicated that Ibrahim was aware that the Firm was encountering a regulatory capital problem given that the firm’s margin call was prompted by unfunded trading on behalf of another customer. According to the Complaint, Ibrahim was directed by Clements to falsely portray that the money received for investment from the elderly client would be used for the daily operations of the firm instead of satisfying the margin call.
The elderly client, according to the Complaint, was not made aware of the firm’s financial troubles. FINRA alleged that such material omissions in the purchase agreement, coupled with the omissions and misrepresentations coming from Ibrahim, misled the investor. The Complaint indicated that the investor was misled both through the overpayment for shares received compared with other recent investors, and via the fact that the firm would need to utilize the majority of the elderly client’s investment to respond to the firm’s deficit that resulted from the aforementioned margin call.
FINRA alleged in the Complaint that from the aforementioned conduct, Avenir, Clements, and Ibrahim had willfully violated Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-4, FINRA Rules 2010 and 2020, and that Clements had aided and abetted Ibrahim’s fraud via directing him on the inflated pricing in the offering to the elderly client.
The Complaint further indicated that since April of 2014, an Avenir registered rep, Cesar Rodriguez, raised $173,800 through the sales of equity interest and promissory notes in a holding company, Bull Run Capital Holdings (“BRCH”), that Rodriguez had created in order to fund a branch office. Rodriguez’s representations, according to the Complaint, had included remarks that the funds would be used to address operating expenses or for growing the holding company. However, the Complaint indicated that Rodriguez in fact used the funds to pay personal expenses that had nothing to do with BRCH.
Consequently, FINRA alleged that Avenir, through the actions of Rodriguez, had willfully violated Section 10(b) of the Exchange Act, Rule 10b-5, and FINRA Rules 2010, 2150, and 2020. FINRA alleged that Clements had also aided and abetted the fraud committed by Rodriguez in that he advised Rodriguez that funds used for personal use were permissible despite not disclosing such intentions of use to investors.
In a related matter on April 27, 2015, Cesar Rodriguez became permanently barred in all capacities from association with any FINRA member firm after consenting to FINRA findings that Rodriguez, by the aforementioned misconduct, had willfully violated Section 10(b) of the Exchange Act of 1934, Rule 10b-5, and FINRA Rules 2010, 2150, and 2020.
On April 27, 2015, FINRA’s Office of Hearing Officers Hearing Panel issued a temporary cease and desist consent order pursuant to FINRA Rule 9840 in response to the aforementioned conduct. Department of Enforcement v. Avenir Financial Group, et al., No. 2015044960401 (Apr. 27, 2015). The Order called for Avenir among its staff to cease and desist from committing violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and aiding and abetting violations of such. The Order additionally called for Avenir, Clements, and Ibrahim to cease and desist soliciting the sales of Avenir equity, unless the true financial condition of the firm had been disclosed. Further, the Order called for Avenir, Clements, and Rodriguez to cease and desist from selling an promissory notes and/or using equity raised by the firm unless full disclosure had been made regarding the true use of proceeds.
Section 10(b) of the Exchange Act makes it unlawful “to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”
Four elements are necessary to show in finding a violation of Section 10(b) of the Exchange Act, Rule 10b-5: 1) misrepresentations and/or omissions were made; 2) misrepresentations and/or omissions were material; 3) representations and/or omissions were made with requisite intent (e.g. scienter), and 4) misrepresentations and/or omissions were made in connection with the purchase or sale of securities.
Public disclosure records reveal that Clements is currently subject to a pending customer dispute from February 3, 2015, where a customer is requesting $1,000,000.00 in damages based on allegations of excessive commissions, breach of fiduciary responsibility, breach of contract, common law fraud, failure to supervise, suitability of transactions, unauthorized trades, churning, and failure to disclose markups.
According to FINRA’s BrokerCheck, Ibrahim has been subject to 4 customer disputes, 2 of which are pending. He is subject to the same aforementioned pending dispute from February 3, 2015, as Clements is. Additionally, on June 3, 2015, Ibrahim became subject to a pending customer dispute, where a customer is requesting $536,180.09 based on allegations of churning, excessive trading and scienter, suitability, unauthorized trading, negligence, breach of contract, breach of fiduciary duty, and misrepresentation.
Public disclosure records via FINRA’s BrokerCheck reveal that Cesar Rodriguez was twice separated from employment after allegations of misconduct. On November 10, 2008, Rodriguez was discharged from Charles Morgan Securities after allegations that Rodriguez violated rules of industry standards of conduct. Rodriguez, not surprisingly, was terminated from Avenir Financial Group in light of FINRA’s permanent bar of Rodriquez from acting as broker or associating with firms selling securities to the public.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
(founder, CEO, CCO), and general securities rep Karim Ahmed Ibrahim, were named in a FINRA Complaint where the Department of Enforcement has alleged that they have committed fraud via sale of promissory or equity notes, and where Clements personally aided and abetted the fraud. Department of Enforcement v. Avenir Financial Group, et al., No. 2015044960501 (Apr. 27, 2015).
According to the Complaint, the Department of Enforcement alleged that Avenir’s sales were mostly associated with elderly customers, and their capital raising prices (discussed below) have continued to occur. The Complaint indicated that from October to December of 2013, the firm had generated $348k from 4 investors, where the price charged for the equity positions had increased 19 fold in less than 1 month after the firm engaged in its first offering. The firm, according to the Complaint, was net capital deficient during its first two offerings and suspended from its securities business operations as a result. The firm reportedly would have become deficient in its 3rd offering had an investor not infused capital into the firm by the time the firm was facing a $196,000 margin call.
FINRA alleged in the Complaint that in November, 2013, Avenir had engaged in the fraudulent conduct via the 3rd offering. Specifically, Ibrahim, acting off of Clements’ direction, solicited a
92 year old firm customer for purposes of investing $250,000 for a 5% equity interest. According to the Complaint, the only document provided to the investor was a purchase agreement.
The Complaint further indicated that Ibrahim was aware that the Firm was encountering a regulatory capital problem given that the firm’s margin call was prompted by unfunded trading on behalf of another customer. According to the Complaint, Ibrahim was directed by Clements to falsely portray that the money received for investment from the elderly client would be used for the daily operations of the firm instead of satisfying the margin call.
The elderly client, according to the Complaint, was not made aware of the firm’s financial troubles. FINRA alleged that such material omissions in the purchase agreement, coupled with the omissions and misrepresentations coming from Ibrahim, misled the investor. The Complaint indicated that the investor was misled both through the overpayment for shares received compared with other recent investors, and via the fact that the firm would need to utilize the majority of the elderly client’s investment to respond to the firm’s deficit that resulted from the aforementioned margin call.
FINRA alleged in the Complaint that from the aforementioned conduct, Avenir, Clements, and Ibrahim had willfully violated Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-4, FINRA Rules 2010 and 2020, and that Clements had aided and abetted Ibrahim’s fraud via directing him on the inflated pricing in the offering to the elderly client.
The Complaint further indicated that since April of 2014, an Avenir registered rep, Cesar Rodriguez, raised $173,800 through the sales of equity interest and promissory notes in a holding company, Bull Run Capital Holdings (“BRCH”), that Rodriguez had created in order to fund a branch office. Rodriguez’s representations, according to the Complaint, had included remarks that the funds would be used to address operating expenses or for growing the holding company. However, the Complaint indicated that Rodriguez in fact used the funds to pay personal expenses that had nothing to do with BRCH.
Consequently, FINRA alleged that Avenir, through the actions of Rodriguez, had willfully violated Section 10(b) of the Exchange Act, Rule 10b-5, and FINRA Rules 2010, 2150, and 2020. FINRA alleged that Clements had also aided and abetted the fraud committed by Rodriguez in that he advised Rodriguez that funds used for personal use were permissible despite not disclosing such intentions of use to investors.
In a related matter on April 27, 2015, Cesar Rodriguez became permanently barred in all capacities from association with any FINRA member firm after consenting to FINRA findings that Rodriguez, by the aforementioned misconduct, had willfully violated Section 10(b) of the Exchange Act of 1934, Rule 10b-5, and FINRA Rules 2010, 2150, and 2020.
On April 27, 2015, FINRA’s Office of Hearing Officers Hearing Panel issued a temporary cease and desist consent order pursuant to FINRA Rule 9840 in response to the aforementioned conduct. Department of Enforcement v. Avenir Financial Group, et al., No. 2015044960401 (Apr. 27, 2015). The Order called for Avenir among its staff to cease and desist from committing violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5, and aiding and abetting violations of such. The Order additionally called for Avenir, Clements, and Ibrahim to cease and desist soliciting the sales of Avenir equity, unless the true financial condition of the firm had been disclosed. Further, the Order called for Avenir, Clements, and Rodriguez to cease and desist from selling an promissory notes and/or using equity raised by the firm unless full disclosure had been made regarding the true use of proceeds.
Section 10(b) of the Exchange Act makes it unlawful “to use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”
Four elements are necessary to show in finding a violation of Section 10(b) of the Exchange Act, Rule 10b-5: 1) misrepresentations and/or omissions were made; 2) misrepresentations and/or omissions were material; 3) representations and/or omissions were made with requisite intent (e.g. scienter), and 4) misrepresentations and/or omissions were made in connection with the purchase or sale of securities.
Public disclosure records reveal that Clements is currently subject to a pending customer dispute from February 3, 2015, where a customer is requesting $1,000,000.00 in damages based on allegations of excessive commissions, breach of fiduciary responsibility, breach of contract, common law fraud, failure to supervise, suitability of transactions, unauthorized trades, churning, and failure to disclose markups.
According to FINRA’s BrokerCheck, Ibrahim has been subject to 4 customer disputes, 2 of which are pending. He is subject to the same aforementioned pending dispute from February 3, 2015, as Clements is. Additionally, on June 3, 2015, Ibrahim became subject to a pending customer dispute, where a customer is requesting $536,180.09 based on allegations of churning, excessive trading and scienter, suitability, unauthorized trading, negligence, breach of contract, breach of fiduciary duty, and misrepresentation.
Public disclosure records via FINRA’s BrokerCheck reveal that Cesar Rodriguez was twice separated from employment after allegations of misconduct. On November 10, 2008, Rodriguez was discharged from Charles Morgan Securities after allegations that Rodriguez violated rules of industry standards of conduct. Rodriguez, not surprisingly, was terminated from Avenir Financial Group in light of FINRA’s permanent bar of Rodriquez from acting as broker or associating with firms selling securities to the public.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
