Initiated By
FINRA
Allegations
CASAS WAS NAMED A RESPONDENT IN A FINRA COMPLAINT ALLEGING THAT HE INTENTIONALLY MADE MATERIAL MISREPRESENTATIONS TO INDUCE INDIVIDUALS TO INVEST A TOTAL OF $83,066.41 AS "SEED CAPITAL" TO HELP FUND THE DEVELOPMENT AND EXECUTION OF A PLANNED REVERSE MERGER TRANSACTION THAT WAS ULTIMATELY NEVER CONSUMMATED. THE COMPLAINT ALLEGES THAT CASAS MISAPPROPRIATED MORE THAN $48,000 OF THE INVESTED FUNDS AND CONVERTED THEM TO HIS OWN PERSONAL USE. CASAS HAS NEVER REPAID THE MISAPPROPRIATED FUNDS. THE COMPLAINT ALSO ALLEGES THAT IN THE SUBSCRIPTION AGREEMENT FOR THESE INVESTMENTS, AS WELL AS RELATED EMAIL COMMUNICATIONS, CASAS REPRESENTED THAT THE INTENDED PURPOSE OF THE FUNDS WAS FOR ACCOUNTING FEES, LEGAL FEES, AND OPERATIONAL EXPENSES OF THE ENTITY THAT WAS PURPORTEDLY FACILITATING THE REVERSE MERGER TRANSACTION. CASAS KNEW AT THE TIME THAT THESE REPRESENTATIONS WERE FALSE SINCE HE INTENDED TO USE THE FUNDS FOR HIS OWN PERSONAL USE. CASAS INDUCED THE PURCHASE OF THE SECURITIES BY THE MEANS OF A MANIPULATIVE, DECEPTIVE OR OTHER FRAUDULENT DEVICE OR CONTRIVANCE, IN WILLFUL VIOLATION OF SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 10B-5.
Resolution
Decision
Bar
Bar (Permanent)
Registration Capacities Affected
All Capacities
Duration
Indefinite
Start Date
1/13/2017
Sanctions
Monetary Penalty other than Fines
Amount
$10,400.94
Sanctions
Restitution
Amount
$50,000.00
Regulator Statement
Extended Hearing Panel decision rendered October 2, 2015 wherein Casas was barred from association with any FINRA member in any capacity, ordered to pay $50,000, plus interest, in restitution to an investor, and ordered to pay costs in the amount of $8,668.17. The sanctions were based on findings that Casas willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, by fraudulently selling securities issued by his company on the basis of false statements of material fact regarding the use of investor funds. The findings stated that Casas made material misrepresentations when soliciting the investors to invest a total of $83,000 in the membership interests of the company he owned and controlled. The purpose of the investments was to fund the development and execution of a reverse merger transaction, which ultimately was never consummated. The findings also stated that Casas converted a majority of the investors' investments to pay his personal expenses. Casas told both investors that their investments would be used to facilitate the reverse merger transaction, particularly with respect to the payment of accounting fees and legal fees, as well as other "operational expenses" of the company. In an email to one of the investors, Casas further represented that the vast majority of the funds-more than 85 percent-would be directed to accounting and legal fees. Instead, Casas paid less than $31,000 to accounting and legal firms, which amounted to approximately 37 percent of the total amount invested. However, at no time did Casas disclose that he intended to use the funds for his own personal expenses. Although the subscription agreement warned investors that the securities were risky and an investment in the company could result in losses, the subscription agreement was insufficient to notify potential investors of Casas' intention to use investor funds for his personal expenses.
On October 26, 2015, J. Michael Casas filed an appeal with the National Adjudicatory Council (NAC). The sanctions are not in effect pending review.
NAC decision rendered January 13, 2017. The sanctions were imposed by the National Adjudicatory Council following appeal for review of an Office of Hearing Officers decision. The sanctions were based on findings that Casas converted investors' funds and willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and FINRA Rules 2010 and 2020 by fraudulently selling securities issued by his company on the basis of false statements of material fact regarding the use of investor funds. The findings stated that Casas made material misrepresentations when soliciting two investors to invest a total of $83,000 in the membership interests of the company he owned and controlled. The purpose of the investments was to fund the development and execution of a reverse merger transaction, which ultimately was never consummated. The findings also stated that Casas use the majority of the investors' investments for his own personal use. Casas misrepresented to the investors how he intended to use their invested funds. Casas told both investors that their investments would be used to facilitate the reverse merger transaction, particularly with respect to the payment of accounting fees and legal fees, as well as other operational expenses of the company. In an email to one of the investors, Casas further represented that the vast majority of the funds would be directed to accounting and legal fees. Instead, Casas paid less than $31,000 to accounting and legal firms. However, in reality, Casas used the funds for his own personal expenses. Although the company's subscription agreement warned investors of the risks associated with an investment in Casas' company, the subscription agreement did not notify potential investors of Casas' intention to use investor funds for his personal expenses.
Decision became final February 15, 2017.
