On December 5, 2013, the Securities and Exchange Commission (“SEC”) filed an Order Making Findings and Imposing Remedial Sanctions And A Cease-and-Desist Order (the “Order”) against John Thomas Capital Management Group, LLC d/b/a PATRIOT 28 LLC (“JTP”), the broker-dealer John Thomas Financial, Inc. (“JTF”), its associated member and owner Anastasios “Tommy” Belesis (“Belesis”), and its branch office manager George Jarkesy Jr. (“Jarkesy”) (collectively “Respondents”).
Belesis founded JTF, a New York based broker-dealer, in 2007 and served as its Chief Executive Officer. JTF was registered with the SEC and was a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). JTF claimed to provide brokerage and investment services, investment banking services, and private wealth management. During JTF’s existence, Jarkesy and Belesis raised $30 million from investors and placed these investor assets into the various funds. The funds were known as John Thomas Bridge and Opportunity Fund LP I (currently known as Patriot Bridge and Opportunity Fund LP I) and the John Thomas Bridge and Opportunity Fund LP II (currently known as Patriot Bridge and Opportunity Fund LP II). The Order alleges that JTP received hundreds of thousands of dollars in fees associated with bridge loans relating to these funds, yet they provided “little or no service.”
The Order stated that JTF and Jarkesy defrauded investors who deposited funds into two (2) JTF hedge funds (“Funds”) by failing to disclose a pre-existing and ongoing business relationships which earned them unauthorized and undisclosed fees. The Order further alleges that, “through Belesis’s influence over [Jarkesy] and [an unnamed Adviser], Respondents aided, abetted and caused [Jarkesy] and [the unnamed Adviser’s] breaches of their fiduciary duties to the Funds.” The Order further states that, “[Jarkesy] and [the unnamed Adviser] elevated the interests of Respondents over those of the Funds by paying or causing to be paid excessive monies to JTF that should have remained with the Funds.” Further, the Order states that the Respondents deprived the Funds “of a material amount of money, directly or indirectly, for placement fees, loans to small companies that then used the money to pay fees to JTF, and for unearned bridge loan fees JTF received for performing little or no services”
According to the Order, Jarkesy and the Funds’ Adviser told investors that the Funds were “wholly independent” from JTC. Jarkesy told investors that he was “responsible for all of the investment decisions” even though he would succumb to demands from Belesis. The Adviser’s website even had a disclaimer indicating that there was no business relationship between the Funds and JTF other than JTF’s role as the placement agent.
The Order provides that Belesis pay a Civil Money Penalty of $100,000 to the SEC, a Disgorgement of $311,948, and a Prejudgment Interest of $88,052. He is barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent, or nationally recognized statistical ratings organization. However, he will have the right to apply for re-entry after one (1) year. He is also prohibited from serving as an adviser, employee, officer, director or advisory board member for any registered investment company and participating in any penny stock offerings. The Order further provides that JTF pay a Civil Penalty of $500,000 to the SEC. Lastly, the Order includes the provision that the Respondents JTC and Belesis “cease and desist from committing or causing any violations and any future violations of Section 206(2) of the Advisers Act.” At the time of its shuttering, JTF had already made more than $100 million in commissions. Nearly $4 million of that amount was generated from fees and commissions directly and indirectly related to the Funds. In April, JTF filed termination requests with FINRA and the company dissolved in July.
Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers who have suffered losses in hedge fund investments, such as the JTF hedge funds, and have pending cases against JTF. Additionally, Lax & Neville LLP has nationally represented small broker-dealers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.