The allegations read: Cantone was named a respondent in a finra complaint alleging that his member firm, while acting through him as its president and majority owner, willfully violated section 10(b) of the exchange act and sec rule 10b-5 thereunder by making fraudulent misrepresentations and omissions of material fact in connection with the sales and subsequent extensions of over $8 million of certificates of participation (cops) in certain promissory notes, as alleged in the first cause of action. The complaint alleges that to date, four of the five relevant promissory notes have defaulted, resulting in approximately $6 million in losses to investors. At the same time, the firm and cantone received fees, commissions and other payments in connection with the offerings of more than $1 million. The complaint also alleges that by the same conduct, the firm and cantone acted in contravention of sections 17(a)(2) and 17(a)(3) of the securities act by making material misrepresentations and omissions in connection with the sale of the cop offerings, which is pleaded in the alternative to the first cause of action. The complaint further alleges that the firm and cantone made improper use of a portion of investors' funds by using the funds as leverage to induce an individual to make payment on a separate promissory note unrelated to the investment the funds had been received for. In addition, the complaint alleges that the firm and cantone recommended to customers that they purchase a cop in a promissory note without having a reasonable basis to believe that the investment was suitable for any investor.
