• Mintbroker executives give SEC testimony before Supreme Court

• Regulator seizes on day trade marketing deals to circumvent law

• But marketing chief ordered ‘at all times’ not to solicit US clients

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian executives have given conflicting evidence over whether a local broker/ dealer used marketing deals with day trading schools to circumvent US laws against soliciting American clients.

The Securities & Exchange Commission (SEC), in a newly-filed bid for summary judgment against Guy Gentile and his now-defunct Mintbroker International, seized on testimony by the latter’s ex-assistant manager which suggested it exploited promotional agreements with “marketing affiliates” to gain access to US trading clients in such a way that it could argue there was no direct solicitation.

Drameko Moore, in testimony given before the Supreme Court following the SEC’s request for Bahamian judicial assistance, disclosed he had discussed the potential ramifications of using these deals to attract American clients with other senior Mintbroker executives.

He said he was told this strategy was “a way to get access to more US clients without there being any direct solicitation”.

However, Mr Gentile, in opposing the SEC’s summary judgment, called upon competing testimony from Janay Pyfrom-Symonette, Mintbroker’s chief marketing officer, in which she said she was ordered “at all times” not to advertise its services directly to US clients.

These testimonies go to the heart of the SEC’s case against Mr Gentile and his former Bahamian broker/dealer, with the capital markets regulator alleging that they violated the Securities Exchange Act by operating as an unregistered broker in the US to solicit American clients.

The federal agency claims that Mr Gentile’s deals with online day trading schools, such as WarriorTrading. com and DayTradingRadio. com, saw them advertise the Bahamian broker/dealer’s services to their students who were also offered “incentives”, discounts and rebates to the fees it charged.

The result, the SEC alleges, saw Mintbroker, which operated under the name SureTrader and was previously known as Swiss America Securities, “balloon” from a three-man operation at its Elizabeth on Bay plaza offices on Bay Street into a 75-strong staff who effected “more than $1bn in customer transactions” at its peak before eventually being placed into full Supreme Court- supervised liquidation at end-2021. “The potential customers targeted by SureTrader (Mintbroker) advertising on affiliate web- sites were US customers,” the SEC asserted, drawing on Mr Moore’s testimony. “SureTrader’s affiliate pro- grammes ‘were a way to get access to more US clients without there being any direct solicitation’. SureTrader did not treat the applications from US customers any differently than customers from other locations.”

Mr Moore, under questioning from Ronique Carey of the Attorney General’s Office, which was representing the SEC, confirmed he was “familiar” with websites that were part of SureTrader’s affiliate programme such as WarriorTrading, the Sykes Challenge, Investorsunderground.com and Mojodaytrading.com.

He added that one of the instructors from those sites was “basically treated as a VIP client in the sense that whatever services or needs he had, he was able to contact my line directly to receive that service faster than the normal route of receiving that service”.

Mr Moore, who now works for Deltec Bank & Trust’s digital assets subsidiary, Delchain, added that clients attracted via the likes of Warrior Trading received “some sort of discount” which he initially described as “a special code”.

Testifying before Renaldo Toote, the Supreme Court’s deputy registrar, he said: “They would receive some of sort of discount, but I don’t remember exactly what that amount was. A promo code, that’s what it was.”

Mr Moore, under questioning from Ms Carey, said he did not discuss the advertising deals with day trading schools or solicitation of US clients with Mr Gentile. However, he admitted having such a conversation “between 2014 and 2015” with Mintbroker’s then-compliance manager, Philip Dorsett, and deputy director, Justin Ritchie.

“The response that I vaguely remember receiving was that - from the top - the sentiment was that the affiliate programmes were a way to get access to more US clients without there being any direct solicitation,” Mr Moore said.

“The affiliate programme was put in place to... so that the company could get into some sort of partnership or agreement with other companies that had trading clients that were possibly looking for a software provider or a trading platform to day trade on.

“And SureTrader was a company that provided those services. So, the affiliate programme was to basically give clients that joined SureTrader using the promo code provided - or I guess the promo code of whichever company they were a part of - some sort of incentive or discount once they joined SureTrader.”

After completing his evidence, Mr Moore was admonished by the Supreme Court “not to discuss anything that transpired today with anybody”. Mr Gentile, though, moved swiftly to rebut this using Ms Pyfrom-Symonette’s testimony to the Supreme Court which was given as part of the same judicial assistance process.

“The SEC has put forth no evidence of solicitation other than the circumstantial evidence that a large percentage of SureTrader customers were US persons,” the former Mintbroker principal said in legal documents filed with the south Florida district court on Monday. “In fact, SureTrader’s chief marketing officer, Janay Pyfrom, made clear in her deposition” that she was forbidden to market to US clients.

Under cross-examination by Philip McKenzie KC, the Davis & Co attorney and partner representing Mr Gentile and Mintbroker, she said: “I was not allowed to advertise in any way to US customers or to US residents...” Asked by Mr McKenzie whether the Bahamian broker/dealer’s policy was “to exclude” US clients, Ms Pyfrom-Symonette replied: “Yes: At all times.”

Confirming that Mintbroker employed an Internet Protocol (IP) pop-up blocker to identify, and alert it, to potential US clients, she added: “The implementation for me was on the website. So anybody that came in from a US IP address would have to clearly state that they were US, and then they had to meet conditions to interact with the firm.

“But, from an implementation point of view, the IP address which Sure- Trader [used] would block the website and then they would have to state that they are from the US.” Mr Gentile, seeking to strengthen his defence, also cited an August 2015 e-mail exchange with Ms Pyfrom- Symonette over a potential affiliate setting up advertising for SureTrader.

“Pyfrom asked Gentile whether he agreed that Pyfrom should inform the potential ‘affiliate’ that ‘[i] t’s important that in any campaign it is clearly indicated that ‘services are not intended for US persons’ and that the United States is not targeted in their PPC [pay-per-click campaign]’,” the Mintbroker chief said.

“Gentile responded: ‘Yes. I agree.’ Pyfrom forwarded a similar exchange to Gentile in September 2015 after she made clear ‘it would best for affiliates to limit their ads to the top three countries’ - the UK, Canada and Australia. There was to be “strictly no advertising to the US”, and Ms Pyfrom added: “We can make keyword recommendations. However, we are not as strict as it relates to this.”

The former Mintbroker principal said: “Gentile chimed in: ‘Please make sure they are not showing ads in the US’. In December 2015, Pyfrom and Gentile exchanged e-mails about advertising provided by Yieldmo Inc. Gentile directed Pyfrom to ‘ensure this [advertising campaign] has no US impressions’, and the ‘count[r]ies targeted’ included Canada, Australia, the United Kingdom, Italy, Israel and Brazil.”

The SEC, though, is far from convinced and is alleging that Mr Gentile and Mintbroker benefited significantly from circumventing US laws. “SureTrader was in the business of being a broker/ dealer from no later than December 2011 until at least November 2019, when its clearing firm changed the services it provided to SureTrader,” it alleged in legal filings.

“SureTrader ballooned from a three-man shop to become a broker/ dealer employing about 75 employees with more than 40,000 customer accounts and assets of more than $10m. SureTrader has effected transactions ‘in excess of $1bn on behalf of its customers’. During the Relevant Period in the complaint, US customers comprised at least 50 per- cent and, at times 80-85 percent, of SureTrader’s customer base.”

Mr Gentile enjoyed a colourful - and sometimes controversial - time in The Bahamas. His broker/ dealer was used as “bait” by the Federal Bureau of Investigations (FBI) to allegedly help snare numerous international securities fraudsters, with his Bahamian offices ‘bugged’ to record video and sound.

These activities resulted in several guilty pleas and convictions. Mr Gentile and his company exited the Bahamas at end-2019 when faced with regulatory actions and investigations by the Securities Commission of The Bahamas. However, in so doing, he bought sufficient time to voluntarily wind-up he broker/dealer himself and remove all its assets from The Bahamas.

That came after Philip Davis KC, then the Opposition’s leader, acting on Mr Gentile’s behalf filed a successful Judicial Review challenge that thwarted the Securities Commission’s efforts to take regulatory action against SureTrader for several months.