SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16379 / December 6, 1999
United States Securities and Exchange Commission v. Arthur Bruce Bahlav and Frank J. Fasano, 99 CV. 11772 (S.D.N.Y.)
Securities and Exchange Commission Files Complaint Alleging
That Arthur Bruce Bahlav and Frank J. Fasano Defrauded Investors of
More Than $1.5 Million
The Securities and Exchange Commission ("Commission") filed an injunctive action today in the United States District Court for the Southern District of New York against Arthur Bruce Bahlav ("Bahlav") and Frank J. Fasano ("Fasano"), both former owners of SFI Investments, Inc. ("SFI"), a now defunct broker-dealer.
The Commission's Complaint alleges that Fasano and Bahlav orchestrated a fraudulent scheme through which they defrauded at least 24 SFI customers of more than $1.5 million. The Complaint alleges that as part of the scheme, Fasano and Bahlav induced the investors to purchase unsecured promissory notes from Fasano and Bahlav typically with securities the investors owned, by promising to pay the investors rates of return on the notes that were significantly higher than the rates of return that the underlying securities were yielding. Fasano and Bahlav promised to return the investors' securities at the notes' maturity.
The Commission's Complaint further alleges that in soliciting investors to purchase the notes, Bahlav made materially false statements, and failed to disclose material information, to investors. Specifically, Bahlav told investors that if they purchased the notes, he and Fasano would not sell the securities the investors used to purchase the notes, but would instead use the securities as collateral for other SFI investments and to expand SFI's business by opening branch offices in several states. Fasano and Bahlav did not use the investors' securities as represented. Immediately after the investors transferred their securities to Fasano and Bahlav, they liquidated the investors' securities and used the proceeds to pay, among other things, their personal and business expenses, and to repay earlier investors their interest and principal.
The Commission alleges that Fasano and Bahlav violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The Commission is seeking to enjoin Fasano and Bahlav from future violations of these provisions of the federal securities laws.