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Michael W. Mandel of Suffern sold the securities in the form of ownership interests in "6 Degree Tequila" via unauthorized private transactions, state Attorney General Matthew J. Platkin said.
Records show Mandel was working at the time as an agent and investment adviser representative for two New Jersey broker-dealers -- Royal Alliance Associates in Old Tappan and, later, LPL Financial of Upper Saddle River.
He didn't tell either of them what he was up to, Platkin said.
Mandel invited prospective investors, including friends and his advisory clients, to "6 Degree" promotional events -- among them, golf outings and cocktail parties -- most of which included a sales pitch, the attorney general said.
Some of the events were held in Warwick, NY, where investigators said Mandel introduced the clients to founder Joseph Cimino and gave them promotional materials.Mandel was paid $5,635 for the introductions and promised equity in the company, federal authorities in New York said. His clients invested about $815,000, they said.
Federal prosecutors in Westchester, NY, charged Cimino with securities fraud in February 2021. He later pleaded guilty in exchange for 18 months in federal prison followed by three years of supervised release. A judge also ordered Cimino to forfeit $159,258 and pay $615,000 in restitution to the victims.
Mandel wasn't implicated in that case.
He came under scrutiny for different reasons -- violating New Jersey Uniform Securities Law and policies at both firms that prohibit registered representatives from engaging in outside business activities, Platkin said.
That includes private securities transactions and selling unapproved products, he said.
For more than two years, beginning in August 2014, Mandel sold $887,000 in unregistered securities on the sisde, of which $439,000 was raised in sales to 10 New Jersey investors, the attorney general said.
Mandel "compounded the investors’ risk of investing in the tequila company by steering several investors to establish self-directed individual retirement accounts that provide no due diligence or guidance regarding investments," Platkin said.
"For at least one of the brokerage firm’s clients, Mandel facilitated the movement of funds that the client had invested out of the client’s firm account to an SDIRA by selling shares held in the client’s firm account and having his assistant help transfer the proceeds," he added.Overall, the New Jersey Bureau of Securities found that Mandel:
- sold unregistered securities;
- acted as an agent of "6 Degree" without registration;
- omitted material facts by failing to disclose to investors that, among other things, the securities were unregistered;
- didn't conduct due diligence with respect to "6 Degree";
- recommended the purchase of the unregistered securities in violation of the firm's policies;
- engaged in dishonest and unethical practices in the securities business.
In addition to assessing a $150,000 civil penalty, the Bureau of Securities revoked Mandel's prior agent and investment adviser representative registrations and denied a current application he filed to register as an investment adviser representative in New Jersey.
“We will not allow financial professionals to enrich themselves by circumventing the laws that provide critical protections for investors and ensure the integrity of our financial markets,” Platkin said.
The Bureau’s investigation was handled by Enforcement Chief Richard Szuch, Supervising Investigator Irwin Slotnick, Supervising Investigator Rachel Glasgow, Investigator Boris Maltsev and Investigator Meryl Hubscher, the attorney general said.
Handling the case for the state, Platkin said, is Section Chief and Deputy Attorney General Victoria A. Manning of the Securities Fraud Prosecution Section in his Division of Law’s Affirmative Civil Enforcement Practice Group.
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