By NEIL HARTNELL
Tribune Business Editor
The principal of a Bay Street-based broker/dealer is seeking a court injunction to halt a probe by US federal regulators that threatens up to 60 Bahamian jobs.
Guy Gentile, in legal filings this week with the New Jersey federal court, alleged that the Securities & Exchange Commission’s (SEC) “never-ending investigation” of his Bahamian business was endangering both its continued operation and his career.
He claimed that his broker/dealer, which has been renamed from Swiss America Securities to MintBroker International, had been “stigmatised” by the US capital markets regulator’s nine-year probe to the extent that six separate financial institutions had severed relationships with it.
Arguing that the SEC was becoming more bold and “audacious”, and persisting with an “unending and retaliatory” investigation that was starting to cripple MintBroker’s operations, Mr Gentile denied he or his company had ever acted as an unregistered broker/dealer that openly solicited US investors and clients.
That claim represents the foundation of the SEC’s case, but Mr Gentile alleged in an affidavit obtained by Tribune Business that MintBroker has taken elaborate precautions to ensure it can never be accused of marketing its products and services directly to Americans.
“I have been under investigation by the SEC for nine years now, though it has never alleged that I have taken action after 2008 (11 years ago) that could constitute a violation of US securities laws,” the MintBroker chief alleged in his March 5 affidavit.
“My business in The Bahamas, where I employ 670 individuals, is highly-regulated.... The SEC’s nine-year long investigation of me and my business has caused stigmatisation by inference. Its actions have real consequences.
“If they continue this never-ending investigation they will eventually succeed in making it impossible for me to continue, and effectively exclude me from my chosen profession without ever asserting another claim. This conduct risks not only my livelihood, but the livelihoods of my dozens of Bahamian employees.”
Mr Gentile alleged that subpoenas sent by the SEC to financial institutions that MintBroker does business with, or holds accounts, had resulted in six “severing” their relationships with himself or the Bahamian broker/dealer.
The latest incident happened on February 7, 2019, when Bank of Montreal issued a letter to MintBroker executives, Antonio Collie and Janay Pyfrom, informing them that it was “ending our banking relationship” with the Bahamian broker/dealer.
“It has been determined that your personal and/or business activities fall outside of our risk appetite, and therefore we do not have an appropriate basis to maintain a banking relationship,” Bank of Montreal wrote. “As a result, we ask that you close your accounts by March 7, 2019. After that time we will cease to operate these accounts.”
Accusing the SEC of causing himself and his Bahamian broker/dealer “irreparable harm”, Mr Gentile said the closure of bank accounts and loss of business relationships with financial institutions “seriously compromised my ability to run my broker/dealer establishments and resulted in financial harm”.
Mr Gentile alleged that Bank of Montreal’s action was a direct result of the SEC probe, but he argued that himself and MintBroker were innocent of the federal regulator’s main charge - that they had actively sought US clients and investors without the necessary license, permits and approvals to do so.
Revealing that MintBroker had lost customers and “client referral sources” due to the SEC investigation and associated subpoenas, he said: “SwissAmerica, and later MintBroker, a Bahamian broker/dealer, does not solicit US customers.
“It maintains a website that is accessible from anywhere in the world, but no marketing efforts whatsoever are directed towards the United States. All of the company’s advertisements on the Internet explicitly state that the advertisement was not intended for US persons, and the broker/dealer’s website contains a pop-up which prevents access to anyone with a US Internet IP address unless they confirm they have not been solicited.
“If a US-based investor seeks an account they cannot circumvent the pop-up and sign for one over the Internet. Instead, they must contact The Bahamas and request an access code. That code, once obtained, will allow the investor to create an online account and acts as proof that the client was not solicited by SureTrader [one of MintBroker’s trade names], but rather voluntarily took steps to find the website and open an account.
“I understand that the securities laws to not preclude unregistered broker/dealers from serving United States customers, and that the prohibition is on soliciting them - something SureTrader takes great effort to avoid doing.”
Tribune Business revealed last month 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 MintBroker and its affiliates have been operating as “an unregistered broker/dealer” in the US – a charge he has vehemently, and repeatedly, denied.
Mr Gentile, 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.
His efforts to block the probe have now intensified, resulting in this week’s filing for an injunction to block the probe until the court can rule on the main issues between the parties. Mr Gentile and his attorneys argued that they had been forced to take urgent action after the SEC “accelerated” its efforts to obtain documents and witness statements from associates.
“In recent weeks, the [SEC’s] Miami regional office has accelerated the pace of its unauthorised actions in a material and impactful way,” they alleged in court filings obtained by Tribune Business. Besides issuing more subpoenas, the SEC also formally announced the investigation via its website - although it did not name Mr Gentile or MintBroker.
“On March 4, 2019 (the day before this application was made), the SEC issued a public litigation release advertising to the world that it was investigating ‘a foreign-based broker/dealer and its principal’, explicitly referring to Gentile and his Bahamas-based broker/dealer,” the MintBroker chief and his attorneys said.
“This press release was intended to tar Gentile as a wrongdoer, just as the obey-the-law injunction the SEC sought – but failed to obtain – [previously] was intended to do. Indeed, this press release takes the uncommon step of publicising a mere subpoena enforcement action (against non-parties and not targets of the investigation), something the Commission appears to have not done in any other case this year.
“Even more troubling is the publishing of these enforcement staff allegations where Gentile had already filed a lawsuit seeking an order prohibiting the SEC from continuing this unauthorised investigation. It is as if the SEC’s press release was quickly issued to inflict maximum harm to Gentile before this court had an opportunity to rule on his cause of action.”
Tribune Business previously reported that Mr Gentile is accusing the SEC of a “sham” investigation, and pursuing a vendetta against him, because he declined to keep co-operating with it as an informant.
He is arguing that the SEC has produced no evidence linking him or his companies to the case involving the SEC’s 2015 Formal Order of Investigation (FOI), or shown that there is any likelihood they are about to violate US securities laws.
That FOI related to a Florida-based company called Traders Cafe. Mr Gentile, in his March 5 affidavit, admitted that the entity had opened an online account with MintBroker but said he “directed my employees to close their accounts” upon learning of the FOI.
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.