UNITED STATES OF AMERICA
SECURITIES EXCHANGE ACT OF 1934
ADMINISTRATIVE PROCEEDING File No. 3-10510
COMMISSION INSTITUTES ADMINISTRATIVE PROCEEDINGS AGAINST ARTHUR BRUCE BAHLAV AND FRANK J. FASANO, FORMER OWNERS OF SFI INVESTMENTS, INC.
The Commission today announced that it has instituted an administrative proceeding against Frank J. Fasano and Arthur Bruce Bahlav, former owners of SFI Investments, Inc. ("SFI"), a now defunct broker-dealer. In the Order, the Division of Enforcement alleges that Fasano and Bahlav engaged in a scheme to defraud investors at SFI. The Order states that administrative proceedings were instituted to determine what remedial action, if any, should be taken against Fasano and Bahlav based upon their criminal convictions in United States v. Arthur Bruce Bahlav and Frank J. Fasano, No. 99 CR 135 (ERK) (E.D.N.Y) for conspiracy to commit securities fraud (as to Fasano) and mail fraud, securities fraud and conspiracy (as to Bahlav), and upon the entry of a final judgment in SEC v. Arthur Bruce Bahlav and Frank J. Fasano, No. 99 Civ. 11772 (S.D.N.Y. December 6, 2000) ("injunctive action").
The Order states that the complaint filed in the injunctive action alleged that, between May 1992 and June 1995, Fasano and Bahlav orchestrated a scheme through which they defrauded at least 24 SFI customers of more than $1.5 million by: (a) inducing investors to purchase unsecured promissory notes from Fasano and Bahlav with promises of high rates of return; (b) making materially false statements, and failing to disclose material information, to investors concerning, among other things, the use and disposition of the securities that investors used to purchase the notes; and (c) liquidating the investors' securities and using the proceeds to pay, among other things, Fasano's and Bahlav's personal and business expenses, and to pay earlier investors their interest and principal.
The final judgments in the injunctive action, which were entered on December 6, 2000, permanently enjoined Fasano and Bahlav from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On August 16, 1999, in connection with his criminal conviction, Bahlav was sentenced to two and one half years in prison, three years probation, and ordered to pay $1.45 millions in restitution. On February 26, 1999, in connection with his criminal conviction, Fasano was sentenced to two and one half years in prison, three years probation, and ordered to pay $1.8 million in restitution.
A hearing will be scheduled to determine whether the allegations in the Order are true and what, if any, remedial sanctions against Bahlav and Fasano are appropriate.
News Digest Summary
COMMISSION INSTITUTES ADMINISTRATIVE PROCEEDING AGAINST ARTHUR BRUCE BAHLAV AND FRANK J. FASANO
The Commission issued an administrative proceeding as to Arthur Bruce Bahlav and Frank J. Fasano, former owners of SFI Investments, Inc ("SFI"). In the Order, the Division of Enforcement alleges that Bahlav and Fasano engaged in a scheme to defraud investors at SFI. The Division of Enforcement alleges, among other things, that Fasano and Bahlav defrauded at least 24 SFI customers of more than $1.5 million by making material misrepresentations in connection with investments in unsecured promissory notes. The Order states that Fasano and Bahlav were convicted of securities fraud by the U.S. District Court for the Eastern District of New York, and that the U.S. District Court for the Southern District of New York permanently enjoined Fasano and Bahlav from violating the federal securities laws. The Order states that the administrative proceeding was commenced to determine what remedial action, if any, should be taken against Fasano and Bahlav based on their criminal convictions and the permanent injunctions.
In the Matter of Frank J. Fasano and Arthur Bruce Bahlav, Admin. Proc. No. X-XXXX (April XX, 2001); SEA Rel. No. 34-XXXX. (Kay L. Lackey, 212-748-8079)