DOB: CE Capital Ltd et al - CD-Rest-NOIF

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IN THE MATTER OF:


CE CAPITAL LIMITED
a/k/a CE CAPITAL LTD.
("CE Capital")
       

ARTHUR CONNOLLY
("Connolly")

TREVOR M. ALLEN, SR.
("Allen")

TROY REJDA
("Rejda")


(Collectively, "Respondents")




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ORDER TO CEASE AND DESIST

ORDER TO MAKE RESTITUTION

NOTICE OF INTENT TO FINE

AND

NOTICE OF RIGHT TO HEARING

DOCKET NO. CRF-17-8212-S

I. PRELIMINARY STATEMENT

1. The Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672a of the General Statutes of Connecticut, the Connecticut Uniform Securities Act (“Act”), and Sections 36b-31-2 to 36b-31-33, inclusive, of the Regulations of Connecticut State Agencies (“Regulations”) promulgated under the Act.
2. Pursuant to Section 36b-26(a) of the Act, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, has conducted an investigation into the activities of Respondents to determine if Respondents have violated, are violating or are about to violate provisions of the Act or Regulations (“Investigation”).
3.
As a result of the Investigation, the Commissioner has reason to believe that Respondents have violated certain provisions of the Act.
4. As a result of the Investigation, the Commissioner has the authority to issue a cease and desist order against Respondents pursuant to Section 36b-27(a) of the Act.
5.
As a result of the Investigation, the Commissioner has the authority to order that Respondents make restitution pursuant to Section 36b-27(b) of the Act.
6. As a result of the Investigation, the Commissioner has the authority to impose a fine upon Respondents pursuant to Section 36b-27(d) of the Act, as amended by Public Act 17-236.

II.  RESPONDENTS

7.
CE Capital and its affiliate, GBI Financial Limited, are purported foreign business entities whose addresses last known to the Commissioner are:  Level 19, Two International Finance Centre, 8 Finance Street, Central, Hong Kong SAR; and 555 West Country Club Lane, C354, Escondido, California 92026.
8. Connolly is an individual whose address last known to the Commissioner is 43 Maple Street Extension, Kent, Connecticut 06757.  Connolly was the Risk Management Officer of CE Capital and a Financial Limited Trustee of GBI Financial Limited.
9. Allen is an individual whose address last known to the Commissioner is 555 West Country Club Lane, C354, Escondido, California 92026.  Allen was the Capital Account Signatory for CE Capital and the Financial Limited Asset Manager for GBI Financial Limited.
10. Rejda is an individual whose address last known to the Commissioner is 2302 West Richwood Road, Ozark, Missouri 65721.  Rejda held himself out as being affiliated with CE Capital.

III.  STATEMENT OF FACTS

11. Investor A is an individual who was seeking an investment with a high rate of return.  A third party put Investor A in touch with Rejda.  Rejda represented to Investor A that Rejda was affiliated with CE Capital and that investing with CE Capital would provide Investor A with a guaranteed return.
12. Rejda subsequently introduced Investor A to Connolly.  Rejda also arranged conference calls with Investor A and Connolly.  In at least one of those calls, Connolly identified himself to Investor A as the Risk Management Officer of CE Capital.
13. On Sunday, August 25, 2013, Investor A executed a “Participation Agreement” with CE Capital.  Allen and Connolly signed the Participation Agreement on behalf of CE Capital.
14. The Participation Agreement provided that, in return for Investor A’s payment of $50,000, CE Capital would return that amount to Investor A in 31 days or less from receipt of Investor A’s payment of $50,000, and would include an additional “agreed Profit Participation” of $450,000 for a total return of $500,000.
15. The Participation Agreement stated that the funds would be used to cover “emergency, miscellaneous operating expenses associated with expediting the transfer of [CE Capital’s] clients [sic] humanitarian investment trade funds via ‘Server to Server’ transfer” as directed by Allen and Connolly.  No additional details were provided to Investor A regarding how his investment proceeds would be used.
16. The Participation Agreement also provided that if CE Capital failed to secure its clients’ humanitarian investment trade funds for any reason, Investor A would immediately receive a return of his $50,000.
17. The Participation Agreement represented that CE Capital’s client “has sufficient humanitarian investment trade funds ready for transfer and that . . . [CE Capital] has sufficient available Credit Line to pull from upon receipt of said humanitarian investment trade funds, and that . . . [CE Capital] has full capability to execute all the terms of this Participation Agreement.”
18. The Participation Agreement directed Investor A to transfer $50,000 to the bank account of The Law Offices of Brian M. Yard, LLC, Attorneys at Law (“Yard Law Firm”).
19. Attorney Brian M. Yard has been a member of the Connecticut Bar since 1988.  Brian M. Yard is the principal member of Yard Law Firm, which has its principal place of business at 21 South Street, Litchfield, Connecticut 06759-1571.  The Yard Law Firm maintains an Interest on Lawyers Trust Account (“IOLTA”) which pools funds into a single, interest bearing account.
20. On Sunday, August 25, 2013, the same day the Participation Agreement was executed, the Yard Law Firm entered into a “Paymaster Agreement” with CE Capital.  The Paymaster Agreement stated that “[m]y firm is prepared to accept and disburse funds on your behalf to ensure the integrity of your upcoming transaction and to expedite your receipt of funds.”  Allen and Connolly executed the Paymaster Agreement on behalf of CE Capital, and Brian M. Yard executed the Paymaster Agreement on behalf of the Yard Law Firm.
21. The Paymaster Agreement also provided that:  (i) the Yard Law Firm would receive CE Capital funds on CE Capital’s behalf “into my Attorney Trust Account and promptly disburse them in accordance with the terms of the Sub-Fee Agreement (to be prepared by you and/or your attorney)”; (ii) funds disbursed by the Attorney Paymaster would be transmitted by bank wire-to-wire transfer “to the accounts provided this law firm by the signatories below”; and (iii) the paymaster fee would “considered earned in full upon receipt of your funds into my Attorney Trust Account and will be deducted from the funds immediately.”
22. On August 26, 2013, Investor A transferred $50,000 into the Yard Law Firm Attorney Trust Account pursuant to the Participation Agreement.
23. Pursuant to the Paymaster Agreement, Connolly directed the Yard Law Firm to disburse Investor A’s funds to the personal accounts of Connolly, Allen and Rejda.  The Yard Law Firm transferred $12,600 to Connolly, $8,000 to Allen, $19,000 to Rejda and $9,500 to the Yard Law Firm.
24. To date, Investor A has not received a return of his $50,000 investment or the promised Profit Participation of $450,000.
25. The Participation Agreement and its accompanying guarantee of a set return constitute securities in the form of an investment contract, evidence of indebtedness and/or certificate of interest or participation in a profit-sharing agreement within the meaning of Section 36b-3(19) of the Act.  Such securities were not registered under Section 36b-16 of the Act nor were they the subject of a filed exemption claim or claim of covered security status.
26. Although Connolly, Allen and Rejda offered and/or sold the Participation Agreement securities, none of them were registered as agents of the issuer (CE Capital) under the Act.
27. In connection with the offer and sale of the Participation Agreement securities, Respondents failed to disclose, inter alia, any financial information concerning Respondents; that Connolly, Allen and Rejda were not registered as agents of issuer or in any other capacity to sell securities in Connecticut; any specific risk factors related to the investment; the precise business and operating history of CE Capital and its affiliates; the remuneration to be paid to the directors, officers and/or of principals of CE Capital; substantiating data explaining how a $50,000 investment could yield an additional return of $450,000 in 31 days or less; or precisely how the investment proceeds would be applied.  Each of these omitted items was material to investors and prospective investors of CE Capital.

IV.  STATUTORY BASIS FOR ORDER TO CEASE AND DESIST,
ORDER TO MAKE RESTITUTION AND ORDER IMPOSING FINE
    

a.  Violation of Section 36b-16 of the Act –
Offer and Sale of Unregistered Securities

28. Paragraphs 1 through 27, inclusive, are incorporated and made a part hereof as if more fully set forth herein.
29.
Respondents, offered and sold unregistered securities in or from Connecticut to at least one investor, as more fully described in paragraphs 11 through 27, inclusive, which securities were not registered in Connecticut under the Act, as more fully described in paragraph 25.  The offer and sale of such securities absent registration constitutes a violation of Section 36b-16 of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, an order that Respondents make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act, as amended.

b.  Violation of Section 36b-4(a) of the Act –
Fraud in Connection with the Offer and Sale of any Security

30. Paragraphs 1 through 29, inclusive, are incorporated and made a part hereof as if more fully set forth herein.
31.
The conduct of Respondents, as more fully described in paragraphs 11 through 27, inclusive, constitutes, in connection with the offer, sale or purchase of any security, directly or indirectly employing a device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person.  Such conduct constitutes a violation of Section 36b-4(a) of the Act, which forms a basis for an order to cease and desist to be issued against Respondents under Section 36b-27(a) of the Act, an order that Respondents make restitution under Section 36b-27(b) of the Act, and for the imposition of a fine upon Respondents under Section 36b-27(d) of the Act, as amended.

c.  Violation of Section 36b-6 of the Act –
Unregistered Agent Activity

32. Paragraphs 1 through 31, inclusive, are incorporated and made a part hereof as if more fully set forth herein.
33.
Connolly, Allen and Rejda each transacted business as an agent of issuer in this state absent registration, as more fully described in paragraphs 11 through 27, inclusive.  Such conduct constitutes a violation of Section 36b-6(a) of the Act, which forms a basis for an order to cease and desist to be issued against Connolly, Allen and Rejda under Section 36b-27(a) of the Act, and for the imposition of a fine upon Connolly, Allen and Rejda under Section 36b-27(d) of the Act, as amended.
34. CE Capital employed Connolly, Allen and Rejda as unregistered agents of issuer in this state, as more fully described in paragraphs 11 through 27, inclusive.  Such conduct constitutes a violation of Section 36b-6(b) of the Act, which forms a basis for an order to cease and desist to be issued against CE Capital under Section 36b-27(a) of the Act, and for the imposition of a fine upon CE Capital under Section 36b-27(d) of the Act, as amended.

    
V.  ORDER 
TO CEASE AND DESIST, ORDER TO MAKE RESTITUTION,
NOTICE OF INTENT TO FINE AND NOTICE OF RIGHT TO HEARING

WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, CE Capital has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, and at least one violation of Section 36b-6(b) of the Act;

WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Connolly has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, and at least one violation of Section 36b-6(a) of the Act;

WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Allen has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, and at least one violation of Section 36b-6(a) of the Act;

WHEREAS, as a result of the Investigation, the Commissioner finds that, with respect to the activity described herein, Rejda has committed at least one violation of Section 36b-16 of the Act, at least one violation of Section 36b-4(a) of the Act, and at least one violation of Section 36b-6(a) of the Act;

WHEREAS, the Commissioner further finds that the issuance of an Order to Cease and Desist, Order to Make Restitution, and the imposition of a fine upon Respondents is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policies and provisions of the Act;

WHEREAS, notice is hereby given to Respondents that the Commissioner intends to impose a maximum fine not to exceed one hundred thousand dollars ($100,000) per violation upon Respondents;

WHEREAS, the Commissioner ORDERS that CE CAPITAL LIMITED a/k/a CE CAPITAL LTD., its affiliates and successors in interest CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities, (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; and (3) employing an agent of issuer in this state absent registration;

WHEREAS, the Commissioner ORDERS that ARTHUR CONNOLLY CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation, (1) offering and selling unregistered securities, (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; and (3) acting as an agent of issuer in this state absent registration;

WHEREAS, the Commissioner ORDERS that TREVOR ALLEN, SR. CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation:  (1) offering and selling unregistered securities; (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; and (3) acting as an agent of issuer in this state absent registration;

WHEREAS, the Commissioner ORDERS that TROY REJDA CEASE AND DESIST from directly or indirectly violating the provisions of the Act and Regulations, including without limitation:  (1) offering and selling unregistered securities; (2) in connection with the offer, sale or purchase of any security, directly or indirectly employing any device, scheme or artifice to defraud, making an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or engaging in an act, practice or course of business which operates or would operate as a fraud or deceit upon any person; and (3) acting as an agent of issuer in this state absent registration;

WHEREAS, the Commissioner ORDERS that RESPONDENTS MAKE RESTITUTION of any sums obtained as a result of Respondents’ violations of Sections 36b-4(a) and 36b-16 of the Act, plus interest at the legal rate set forth in Section 37-1 of the General Statutes of Connecticut.  Specifically, the Commissioner ORDERS that:

1.  Within thirty (30) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with a written disclosure which covers the period from January 1, 2013 to the date this Order to Make Restitution becomes permanent and which contains (a) the name and address of each investor, (b) the amount Respondents collected from each investor, and (c) the amount of any refunds of principal or purported interest payments Respondents made to each investor;
   
2.  Within forty-five (45) days from the date this Order to Make Restitution becomes permanent, Respondents shall reimburse each investor the amount of funds collected from the investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments made to the investor, with respect to all transactions effected from January 1, 2013 to the date this Order to Make Restitution becomes permanent.  Such restitution shall be made by certified check, and shall be sent by certified mail, return receipt requested, to each affected investor; and
    
3. Within ninety days (90) days from the date this Order to Make Restitution becomes permanent, Respondents shall provide the Division with proof in the form of copies of the certified checks and the return receipts required by paragraph 2 of Section V of this Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing (collectively “Order”), that Respondents have reimbursed each investor the amount of funds collected from each such investor plus interest, less funds returned in the form of purported refunds of principal and purported interest payments, with respect to all transactions effected from January 1, 2013 to the date this Order to Make Restitution becomes permanent.

THE COMMISSIONER FURTHER ORDERS THAT, pursuant to Section 36b-27 of the Act, as amended, each Respondent will be afforded an opportunity for a hearing on the allegations set forth above if a written request for a hearing is received by the Department of Banking, Securities and Business Investments Division, 260 Constitution Plaza, Hartford, Connecticut 06103-1800 within fourteen (14) days following each Respondent’s receipt of this Order.  To request a hearing, complete and return the enclosed Appearance and Request for Hearing Form to the above address.  If any Respondent will not be represented by an attorney at the hearing, please complete the Appearance and Request for Hearing Form as “pro se”.  If a hearing is requested, the hearing will be held on January 30, 2018, at 10 a.m., at the Department of Banking, 260 Constitution Plaza, Hartford, Connecticut.

The hearing will be held in accordance with the provisions of Chapter 54 of the General Statutes of Connecticut.  At such hearing, each Respondent will have the right to appear and present evidence, rebuttal evidence and argument on all issues of fact and law to be considered by the Commissioner.

If any Respondent does not request a hearing within the time period prescribed or fails to appear at any such hearing, the allegations herein against any such Respondent will be deemed admitted.  Accordingly, the Order to Cease and Desist and Order to Make Restitution shall remain in effect and become permanent against any such Respondent and the Commissioner may order that the maximum fine be imposed upon any such Respondent.

Dated at Hartford, Connecticut,       ____/s/_____________ 
this 1st day of December 2017.   Jorge L. Perez
    Banking Commissioner 



CERTIFICATION

I hereby certify that on this 4th day of December 2017, I caused to be mailed by certified mail, return receipt requested, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing to:  CE Capital Limited a/k/a  CE Capital Ltd., 555 West Country Club Lane, C354, Escondido, California 92026, certified mail no. 7012 3050 0000 6997 6674; Arthur Connolly, 43 Maple Street Extension, Kent, Connecticut 06757, certified mail no. 7012 3050 0000 6997 6643; Trevor M. Allen, Sr., 555 West Country Club Lane, C354, Escondido, California 92026, certified mail no. 7012 3050 0000 6997 6650; and Troy Rejda, 2302 West Richwood Road, Ozark, Missouri 65721, certified mail no. 7012 3050 0000 6997 6681.  I also caused to be mailed by registered mail, return receipt requested, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing to CE Capital Limited a/k/a CE Capital Ltd., Level 19, Two International Finance Centre, 8 Finance Street, Central, Hong Kong SAR, registered mail no RB 028 021 527 US.
 

___/s/____
W. C. Hall
Paralegal

       [SUPPLEMENTAL] CERTIFICATION

I hereby certify that on this 4th day of December 2017, I also caused to be mailed by registered mail, return receipt requested, the foregoing Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Fine and Notice of Right to Hearing to CE Capital Limited a/k/a CE Capital Ltd., Level 19, Two International Finance Centre, 8 Finance Street, Central, Hong Kong SAR, registered mail no RE 418 646 674 US.
 

___/s/____
W. C. Hall
Paralegal

                                                              
                                        


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