|NEWARK – The New Jersey Bureau of Securities today filed legal action against, and separately revoked the registrations of, two individuals who operate a Tinton Falls broker-dealer who defrauded over 170 investors in a scheme involving investment in a Florida condominium complex called Esplanade at Millennia Condominiums.
Bureau Chief Laura H. Posner revoked the registrations held by Anthony J. Cantone and his wife, Christine L. Cantone, following the Bureau’s investigation. Anthony J. Cantone is President and CEO of broker-dealer Cantone Research Inc. (CRI), and was registered by the Bureau as an agent and investment adviser representative at CRI. He also is Managing Member of Cantone Office Center, LLC (COC). Christine Cantone is Vice President and was Chief Compliance Officer of CRI when the fraudulent scheme was ongoing, and was registered by the Bureau as an agent at CRI. They both reside in Thompson, Pennsylvania.
Separately, the New Jersey Bureau of Securities filed suit in New Jersey Superior Court against the Cantones, CRI, and COC, seeking restitution for the defrauded investors and penalties.
The Bureau’s investigation found that Anthony J. Cantone, through CRI, offered the sale of securities that were certificates of participation in promissory notes to investors in 2005 and 2007 in a planned 186-unit condo complex in Orlando, Florida. CRI sold the certificates after Cantone Office Center bought a promissory note from the developer. More than $4.7 million was raised from investors.
In 2005, the developer borrowed $2.6 million from Cantone Office Center. In 2006, the developer defaulted on the promissory note, which was not disclosed to investors. In 2007, Cantone Office Center lent the developer an additional $5.1 million, and in 2006, Anthony J. Cantone provided a $1 million bridge loan to the developer. The $1 million bridge loan was used to hide the default on the 2005 note and, unbeknownst to investors, to pay the interest income owed to the 2005 investors.
“Anthony J. Cantone misled investors and hid material facts that investors were entitled to know before investing their hard-earned money,” Acting Attorney General John J. Hoffman said. “Cantone’s financial maneuverings allowed more investors to be pulled in and defrauded. We’re working to obtain restitution for all these investors.”
Anthony Cantone and CRI falsely told investors that the principal and interest on their investment was guaranteed. In addition, the 2005 investors were promised returns of either 10% or 13%, while the 2007 investors were promised returns of 8% or 11%.
“Anthony J. Cantone promised rates of return that were abnormally high. High rates of return often can be too good to be true, and unfortunately, that turned out to be the case here,” said Steve C. Lee, Acting Director of the New Jersey Division of Consumer Affairs.
Both the 2005 and 2007 certificates were neither registered nor exempt from registration with the Bureau of Securities, meaning that they could not legally be offered to investors.
Ultimately, Cantone Office Center lacked the assets to satisfy the guarantees made to investors. The condo developer later declared bankruptcy, owing $10 million to Cantone Office Center.
“Anthony J. Cantone’s sale of the Esplanade-related unregistered securities was not only unethical and dishonest, but fraudulent. In addition to making unsubstantiated guarantees of investment returns to investors, CRI, through Anthony J. Cantone, failed to disclose to investors critical and material information about the finances of the deal,” Bureau Chief Posner said.
Bureau Chief Posner added that, Christine Cantone’s conduct was just as harmful as her husband’s conduct to investors. In addition to failing to supervise her husband’s sale of the Esplanade-related certificates of participation, the Bureau found that Christine Cantone failed to reasonably supervise another employee at CRI who operated a $10 million Ponzi scheme for four years while at the firm through the sale of a tax exempt interest bearing investment in a fictitious healthcare firm.
Relatedly, today the Financial Industry Regulatory Authority (“FINRA”) filed a complaint charging CRI and Anthony Cantone with fraud in connection with the sales and subsequent extensions of more than $8 million of certificates of participation in five promissory notes, and charging Christine Cantone with failing to supervise Anthony Cantone. The investments at issue in the FINRA action are separate from the investments at issue in the Bureau actions.
Supervising Investigator Michael McElgunn and Investigator Richard Smullen of the Bureau of Securities conducted the investigation into this matter. Deputy Bureau Chief Amy Kopleton oversaw action on this matter on behalf of the Bureau.
Deputy Attorney General Victoria A. Manning, Chief of the Securities Fraud Prosecution Section in the Division of Law, and Joshua Sherman, Deputy Chief of the Securities Fraud Prosecution Section, are representing the State in this matter.
The Bureau of Securities can be contacted toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600. The Bureau's web site is located at www.NJSecurities.gov.