A complaint filed by FINRA's Department of Enforcement charged the Arizona-based Scottsdale Capital Advisors Corporation and brokers John J. Hurry, Timothy B. Diblasi and D. Michael Cruz with helping a Cayman Islands broker-dealer generate over $1.7 million in proceeds from illegal sales due to liquidation of microcap stocks in transactions that should have been (but were not) registered with the SEC.
FINRA OHO Disciplinary Proceeding #2014041724601
According to the charges, Scottsdale Capital liquidated over 74 million shares of the microcap stocks Neuro-Hitech Inc., Voip Pal.com, and Orofino Gold Corp., subsequently generating at least $1.7 million for a Cayman Islands broker-dealer customer of Scottsdale, which FINRA says was owned, controlled, and directed by Hurry to establish accounts and sub accounts at Scottsdale and deposit over 650 million microchip stock shares, including 145 million share liquidations, which FINRA says generated about $5.5 million in proceeds.
FINRA states that Scottsdale Capital used the clearing firm Alpine Securities Corporation, which was also indirectly owned and controlled by Hurry.
The complaint states that Hurry established the Cayman Islands brokerage for high-risk foreign microchip stock liquidations, pointing out that Cayman Islands secrecy laws further shielded customer identities from disclosure and exempted Hurry's securities business from certain regulations.
FINRA portrayed the scheme thusly: A third party would loan funds to an issuer of microchip stock, which would be converted to shares by a foreign entity. These shares then were deposited into a Scottsdale Capital account, subsequently liquidated, and the proceeds wired out.
Scottsdale Capital's Chief Compliance Officer Timothy B. DiBlasi purportedly failed to establish and maintain adequate supervisory systems, including written supervisory procedures, as relates to sales of unregistered shares of microchip stocks while President and Approving Principal D. Michael Cruz allegedly failed to conduct reasonable inquiries into the illegal sales of the three named microchip stocks, even though multiple red flags suggested the sales may have been illegal and the stocks unregistered.
Neuro-Hitech is a former pharmaceutical company turned oil-and-gas business headquartered in Florida, VoipPal.com (incorporated as All American Casting International, Inc. and formerly VOIP MDU.com) is a Nevada company headquartered in Washington states, and Orifino Gold is a Nevada cleaning corporation headquartered in China.
If you have invested with Scottsdale Capital Advisors, John Hurry, Timothy DiBlasi, D Michael Cruz or with any broker or firm whose illegal liquidation, sales, or other transaction activity of unregistered stocks or other securities products has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for investigation and consultation.