The Department of Banking News Bulletin
Bulletin # 3044 - Week Ending June 24, 2022
This bulletin constitutes the only official notification you will receive from this office concerning any of the following applications. Any observations you may have are solicited. Any comments should be in writing to Jorge L. Perez, Banking Commissioner, Department of Banking, 260 Constitution Plaza, Hartford, CT 06103-1800. Written comments will be considered only if they are received within ten business days from the date of this bulletin.
Section 36a-145 of the Connecticut General Statutes requires that certain applications for a branch or limited branch at which loans will be made address how the establishment of the branch will be consistent with safe and sound banking practices and promote the public convenience and advantage. Plans may be submitted when such applications are filed and any plans that are filed will be made available for public inspection and comment at the Department for a period of 30 days. Questions concerning branch activity should be directed to the Financial Institutions Division at (860) 240-8180.
DATE: June 21, 2022
BANK: First County Bank, Stamford
LOCATION: 48 Atlantic Street, Stamford, CT 06901
ACTIVITY-BRANCH TYPE: Filed Notice of Branch Closing
PROPOSED CLOSING DATE: October 14, 2022
Interstate Loan Production Office
On June 21, 2022, the Commissioner approved the application of 1st Financial Bank USA, a South Dakota-chartered bank, to establish a loan production office in Connecticut pursuant to Section 36a-412(d) of the Connecticut General Statutes. The office will be located at 47 Sherman Hill Road in Woodbury, Connecticut. The public anticipated opening date for this LPO is to be determined.
CONSUMER CREDIT DIVISION ACTIVITY
Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Issue Order to Cease and Desist and Notice of Intent to Impose Civil Penalty
On June 17, 2022, the Commissioner issued a Temporary Order to Cease and Desist, Order to Make Restitution, Notice of Intent to Issue Order to Cease and Desist, Notice of Intent to Impose Civil Penalty and Notice of Right to Hearing (collectively, “Order”) in the Matter of: Sixela LLC d/b/a CNAC, NMLS # 1389504, Cranston, Rhode Island (“Respondent”). The Order was the result of an investigation by the Consumer Credit Division. The Commissioner alleges that: (1) Respondent’s acting within this state as a sales finance company without a license constitutes a violation of Section 36a-536 of the Connecticut General Statutes; and (2) Respondent’s failure to file advance notice of its change in location on the Nationwide Multistate Licensing System and Registry constitutes a violation of Section 36a-540(b) of the Connecticut General Statutes in effect at such time. The Commissioner found that the public welfare required the issuance of a Temporary Order to Cease and Desist against Respondent. As part of the Order to Make Restitution, Respondent was ordered to repay any fees and interest obtained as a result of Respondent violating Section 36a-536 of the Connecticut General Statutes, plus interest. Respondent was afforded an opportunity to request a hearing with regard to the allegations set forth in the Order.
SECURITIES AND BUSINESS INVESTMENTS DIVISION ACTIVITY
Samuel Klein, Visual Group, LLC and KF Pecksland, LLC
On June 20, 2022, the Banking Commissioner entered an Order to Cease and Desist, Notice of Intent to Fine and Notice of Right to Hearing (No. CDF-22-8408-S) against Samuel Klein of 131 Pecksland Road, Greenwich, Connecticut, Visual Group, LLC of 58 East Main Street, Plainville, Connecticut and KF Pecksland, LLC of 131 Pecksland Road, Greenwich, Connecticut. Respondent Klein was affiliated with the two entities and was the sole member and control person of Visual Group, LLC. Visual Group, LLC purportedly invested in distressed real estate debt. KF Pecksland, LLC purportedly invested in The Bleachers Corporation, a now-defunct stock corporation of which Klein was the president.
The action alleged that in 2018, Klein sold investments in Visual Group, LLC to at least one investor, representing that he would personally guarantee a return of principal and that the investor’s money would double or triple. The action also alleged that Klein did not disclose to investors that, rather than being invested in distressed real estate debt, their monies would be used for Klein’s personal financial benefit.
The action further alleged that, starting in 2016, Klein sold securities consisting of membership interests in KF Pecksland, LLC to at least one investor. Klein allegedly represented to investors that KF Pecksland, LLC’s underlying investment in The Bleachers Corporation was valued between $25 and $50 million when in reality The Bleachers Corporation was struggling to stay solvent. In addition, the action alleged that Klein guaranteed investors that they would receive their money back but failed to disclose that he would use investor funds for his personal benefit.
The Order to Cease and Desist and Notice of Intent to Fine alleged that 1) the respondents offered and sold unregistered securities in violation of Section 36b-16 of the Connecticut Uniform Securities Act; 2) the respondents violated the antifraud provisions in Section 36b-4(a) of the Act; and 3) respondent Klein violated Section 36b-6 of the Act by transacting business as an unregistered agent of issuer.
The Respondents were afforded an opportunity to request a hearing on the allegations in the Order to Cease and Desist and Notice of Intent to Fine.
In a related matter, on May 3, 2022, following a plea of guilty in an action brought by the Department of Justice, Klein was sentenced to a 36 month term of imprisonment for violating 18 U.S.C. Section 2314 (Interstate Transportation of Property Taken by Fraud) and a 36 month term of imprisonment for violating 18 U.S. C. Section 1957 (Money Laundering) (United States of America v. Samuel Klein (D. Conn. (Case No. 3:20-CR-00243-JCH(1)). The sentences would run concurrently. The facts underlying the federal action paralleled those in the Commissioner’s June 20, 2022 action. In imposing sentence, the District Court also ordered Klein to pay $1,497,797.52 in restitution to the affected victims. In light of the District Court’s order, although the Commissioner was authorized to order restitution to the affected victims pursuant to Section 36b-27(b) of the Act, the Commissioner elected not to do so since such relief would replicate that ordered by the court.
Michael M. Reilly (CRD No. 4841098) and Quantum Capital Investments, LLC
On June 23, 2022, the Banking Commissioner entered a Consent Order (No. CO-22-8518-S) with respect to Quantum Capital Investments, LLC of 117 State RT 39, New Fairfield, Connecticut 06812 and Michael M. Reilly, principal of the firm.
The Consent Order alleged that Reilly, through Quantum Capital Investments, LLC, violated Section 36b-16 of the Connecticut Uniform Securities Act by selling unregistered securities in the form of investments in a cryptocurrency pool. The Consent Order also alleged that the respondents violated the antifraud provisions in Section 36b-4 of the Act by failing to disclose to investors that investors were investing in a cryptocurrency pool rather than in bitcoin directly, and that respondent Reilly had been subject to a 2008 Consent Order issued by the Commissioner (No. CO-2008-7427-S) barring Reilly from transacting business as a broker-dealer, agent, investment adviser or investment adviser agent for seven years.
The Consent Order directed the respondents to cease and desist from regulatory violations. In addition, the Consent Order barred Reilly for seven years from offering or selling securities in or from Connecticut; transacting business as a broker-dealer, agent, investment adviser or investment adviser agent; and acting in any other capacity requiring a license or registration from the Commissioner.
Based on the Respondents’ demonstrated inability to pay the $15,000 fine that otherwise would have been imposed against them, the Consent Order temporarily stayed imposition of the fine for three years. At the end of three years, if the Respondents remained unable to pay the administrative fine, the fine would be waived.
Jorge L. Perez