Initiated By
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Allegations
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”), and Sections 203(e) and 203(k) of the Investment Advisers Act of 1940 (“Advisers Act”) against Goldstone Financial Group, LLC (“GFG”); pursuant to Section 8A of the Securities Act and Sections 203(f) and 203(k) of the Advisers Act against Anthony Pellegrino; and pursuant to Section 8A of the Securities Act, Section 15(b) of the Securities Exchange Act of 1934 (“Exchange Act”), Sections 203(f) and 203(k) of the Advisers Act, and Section 9(b) of the Investment Company Act of 1940 (“Investment Company Act”) against Michael Pellegrino (collectively, the “Respondents”). The Commission finds that from at least May 2017 through June 2018, the Respondents offered and sold $37 million of 1 Global Capital LLC (“1 Global”) securities to their advisory clients and insurance and annuity customers in unregistered transactions and did not adequately disclose to their clients the fees that they received from 1 Global. In total, Michael Pellegrino and Anthony Pellegrino, through GFG, received approximately $1.6 million in fees from 1 Global for selling the securities. 1 Global marketed its investment as a safe and secure alternative to the stock market and baselessly claimed that investing in 1 Global’s merchant cash advance business would achieve high single-digit or low double-digit annual returns. Like other 1 Global sales agents, Anthony Pellegrino and Michael Pellegrino repeated those claims to prospective investors. Unbeknownst to Respondents or their clients, 1 Global’s business was a fraud. 1 Global and its chairman and chief executive officer Carl Ruderman (“Ruderman”) were misrepresenting how they were using investor money, syphoning off millions in investor funds to fund Ruderman’s luxury lifestyle and operate unrelated businesses. 1 Global’s business came to a crashing halt when it filed for bankruptcy in July 2018, leaving many of Respondents’ clients and thousands of other investors with hundreds of millions of dollars in losses. During the time Respondents offered and sold 1 Global securities, 1 Global did not register its securities offering with the Commission, and there was no applicable exemption for this offering. As a result of the conduct described herein, Respondents willfully violated Section 206(2) of the Advisers Act, and Sections 5(a) and (c) of the Securities Act.
Resolution
Order
Sanctions
Cease and Desist
Sanctions
Censure
Sanctions
Civil and Administrative Penalty(ies)/Fine(s)
Amount
$30,000.00
Broker Comment
After 1GC filed for bankruptcy and was charged by the SEC, the Firm and Anthony provided funds to facilitate a settlement with all its clients who invested in 1GC, returning the referral fees received from 1GC in addition to insurance proceeds. The Firm and Anthony at their own expense assisted its clients to file proofs of claim in the 1GC bankruptcy. The Firm also hired a new chief compliance officer, created a new due diligence committee to review and approve new investment products, and implemented a more robust Compliance program, including revised relevant policies and procedures, and implemented prohibitions to prevent violations going forward.
