Anthony J. Cantone and Christine L. Cantone agreed to the terms with the Bureau, set forth in two documents, to resolve actions against them and the investment companies they own in Tinton Falls – Cantone Research, Inc. (“CRI”) and Cantone Office Center, LLC (“COC”).

As stated in an Administrative Consent Order, the Bureau found that the defendants engaged in dishonest or unethical practices in selling securities – in the form of certificates of participation – to more than 170 investors. These investors put up $4.7 million to invest in loans, in the form of promissory notes, taken out by a developer for a planned 186-unit condo complex in Orlando called Esplanade at Millennia Condominiums.

According to the settlement documents, the defendants did not alert investors to facts they were entitled to know before they bought the certificates, including that the developer who guaranteed their investments was highly leveraged and that the securities they purchased were neither registered nor exempt from registration with the Bureau, meaning that they could not legally be offered to investors. The developer eventually defaulted on the investment loans for the project.

“New Jersey laws governing the sale of investments are designed to protect those who seek a return on the money they invest. While all investments have risks, prospective investors are entitled to a full and honest assessment of those risks before they hand over their hard-earned money,” said Attorney General Porrino. “The securities industry only works when agents and representatives act with the utmost integrity. In this case, the defendants did not.”

According to the Administrative Consent Order, from 2005 through 2007, Anthony Cantone, through CRI, sold certificates of participation (COP) in subordinated promissory notes, totaling nearly $8 million. Cantone Office Center, LLC had purchased the promissory notes from Esplanade Development, LLC, owned by Robert A. Crowder, which was seeking to build condominiums in Orlando, Florida.

Anthony Cantone is President and CEO of broker-dealer CRI, and was registered by the Bureau as an agent and investment adviser representative at CRI. He also is Managing Member of COC. Christine Cantone is Vice President and was Chief Compliance Officer of CRI when the scheme was ongoing, and was registered by the Bureau as an agent at CRI.

In a Confidential Disclosure Memoranda (CDM) to potential investors, the defendants had stated that Crowder personally guaranteed payment on the certificates of participation, but the CDM did not accurately disclose Crowder’s net worth or his tenuous financial state.

Potential investors were not told that in 2006, Crowder defaulted on a $2.6 million promissory note COC had purchased in 2005. Nor were they informed that in 2006, Anthony Cantone provided a $1 million bridge loan to Crowder that was used to hide the default on the 2005 note and pay the interest income owed to the 2005 investors. It was further undisclosed to investors that in 2007 COC lent the developer an additional $5.1 million. Esplanade Development LLC, eventually defaulted on the promissory notes and Crowder failed to honor his guaranty.

The Bureau found that the activities of the Cantones and CRI constituted dishonest or unethical practices in the securities business. In addition, Christine L. Cantone, who served as the firms’ compliance officer, did not provide adequate supervision of Anthony Cantone’s activities, the Bureau found.

“The defendants denied investors critical information they were entitled to under the law that would have better informed them about the risks they faced in this investment project,” said Steve Lee, Director of the Division of Consumer Affairs. “As a result of the defendants’ dishonesty, investors suffered significant financial losses.”

Under terms of the Consent Order and Final Judgment resolving an action by the Bureau against the defendants in Superior Court, the Cantones and their companies must pay $1.8 million in restitution to investors, and pay a $300,000 civil penalty. In the Administrative Consent Order, Anthony and Christine Cantone agreed to a suspension of over 18 months of their registrations with the Bureau. They also agreed to the engagement of an independent consultant to review, assess and provide recommendations as to certain aspects of CRI’s business; and Anthony and Christine agreed not to act in a supervisory capacity.

“The defendants’ dishonest or unethical practices violated the law and compromised the integrity of New Jersey’s securities industry,” said Deputy Bureau Chief Amy Kopleton. “The civil penalties and restitution the defendants must pay, along with the administrative restrictions and remedies placed on them, will serve as notice to the industry that the Bureau of Securities will not tolerate such practices.”

The Bureau’s action was handled by Deputy Bureau Chief Amy Kopleton, Chief of Investigations Rudolph Bassman, Supervising Investigator Michael McElgunn, and Investigator Richard Smullen of the Bureau of Securities, within the Division of Consumer Affairs.

Deputy Attorney General/Section Chief Victoria Manning, Deputy Attorneys General Toral Joshi, Mehnaz Rahim, Isabella Stempler, and Benjamin Zakarin, and Special Services Employee Aaron Ash of the Securities Fraud Prosecution Section in the Division of Law represented the Bureau in this matter.

The Bureau of Securities is charged with protecting investors from investment fraud and regulating the securities industry in New Jersey. It is critical that investors “Check Before You Invest.” Investors can obtain information, including the registration status and disciplinary history, of any financial professional doing business to or from New Jersey, by contracting the Bureau toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600, or by visiting the Bureau’s website at www.njsecurities.gov. Investors can also contact the Bureau for assistance or to raise issues or complaints about New Jersey-based financial professionals or investments.

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