By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The principal of a former Bahamian broker/dealer has slammed recommendations that he be ordered to pay $15.537m in fines and disgorged profits as “flawed” and “punitive and political”.

Guy Gentile, head of Mintbroker International, which was placed into full liquidation by the Bahamian Supreme Court in December 2021, hit out after Judge Edwin Torres on Monday recommended that he “disgorge” $13.13m in profits/revenues earned by his former Nassau-based business.

The judge found Mr Gentile, a one-time FBI informant whose Elizabeth on Bay plaza-based business was used by US law enforcement to ensnare securities fraudsters, “jointly and severally liable” to pay the $13.13m because he was in charge of Mintbroker when it was found to have violated US securities laws.

He also recommended that the ex-Mintbroker chief “disgorge” a further $520,000 personally, plus pay a “first-tier” civil penalty worth $1.887m. However, the combined penalties and disgorgment recommended are almost 23 percent, or some $4.6m, less than the $20.151m punishment that had been sought by the US Securities & Exchange Commission (SEC) over Mr Gentile’s Bahamas activities.

A south Florida jury last year found Mr Gentile and Mintbroker International liable for violating US securities laws by actively soliciting American clients despite not being registered with the SEC. And, Mr Gentile, in an e-mail reply to Tribune Business inquiries, confirmed he will be challenging the penalties and disgorgement recommendations.

Asserting that the “entire case” against him “won’t survive the light of day on appeal”, the Mintbroker chief said Judge Torres had blasted his disdain for a trading regulation that is likely to soon be relaxed because the US Financial Industry Regulatory Authority (FINRA) views it as too restrictive.

“To be clear, this was not a final ruling, just a recommendation from a magistrate judge. We are formally objecting, and Judge Bloom [the judge overseeing the court battle with the SEC] is required to conduct a de novo review of the issues,” Mr Gentile blasted.

“The magistrate’s report is deeply flawed. It recommends I be held jointly liable for over $13m in revenue that I never received, plus speculative penalties with no legal basis. The recommendation violates binding Supreme Court precedent....., which limits disgorgement to net profits personally obtained, not gross company revenue.

“The penalty figure is even more bizarre, based on a fictional SEC ‘registration fee’ that doesn’t actually exist. We’ll be filing objections.If Judge Bloom adopts the recommendation without correction, we’ll be appealing immediately. There’s simply no lawful basis for the financial figures the SEC is pushing,” he argued.

“And yes, I do believe the report is punitive and political, not equitable. What’s ironic is that this entire case centred on the now-discredited Pattern Day Trading rule - a rule FINRA is actively working to repeal as outdated and harmful. Punishing someone for calling it ‘stupid’ while regulators now agree with that view shows how disconnected this process has become from common sense.”

The existing ‘pattern day trading’ rule limits investors with less than $25,000 in their margin account from borrowing to trade four or more times in a five-day period. FINRA is now mulling whether to reduce this sum to $2,000.

“This entire case won’t survive the light of day on appeal,” Mr Gentile subsequently asserted to Tribune Business. “The magistrate is recommending I pay $13m I never received, plus a fake $1.8m ‘registration fee’ that doesn’t exist - all because I criticised a rule even FINRA is now repealing.

“Judge Bloom flipped her own definition of ‘solicitation’ after trial just to manufacture liability, contradicting what she said at summary judgment. The jury charge was rigged, the law was rewritten mid-case, and now they want to bury me with penalties that have no legal foundation. Everything about this case is wrong and, frankly, something is rotten in Denmark. We’re going to expose it.”

Judge Torres recommended that Mr Gentile be “permanently enjoined”, or barred via an injunction, from committing similar US securities law violations to those asserted by the SEC. He ruled that Mr Gentile created Sure Trader, his Bahamas-based brokerage, to get around the Pattern Day Trader rule and FINRA.

“Here, the record is replete with testimony and references to Gentile’s years’ long opposition to the Pattern Day Trader Rule,” Judge Torres wrote, recalling how in his own testimony he admitted that he “decided to set up a firm internationally so that foreign people would not have to deal with getting restricted. . . . No one likes the rule. It’s a stupid rule”.

“By his own admission, Gentile created Sure Trader to circumvent what the business he founded later termed ‘the nasty PDT rule’ and ‘FINRA, the killjoy Financial Industry Regulatory Authority’,” Judge Torres added. “Gentile’s behaviour indicates a disdain for some elements of the securities laws and a clear willingness to flout them.”

He also remarked on the “brazenness” of some of Mr Gentile’s evidence and the “lawyerly bravado” that accompanied some of his attorney’s findings. “Accordingly, there is nothing in the record before us to suggest that Gentile has either recognised the wrongful nature of his conduct or issued any assurances that he will not continue to violate the securities laws,” Judge Torres added.

“These factors, then, also counsel in favour of imposing an injunction.” The $1.887m penalty was based on the registration fee that Sure Trader would have paid to be licensed by the SEC, while the $520,000 personal disgorgement was based on a consulting fee Mr Gentile and his family allegedly received from the Bahamian broker/dealer.

Mr Gentile enjoyed a somewhat colourful stay in the Bahamas, with Tribune Business reporting in 2016 how he and his broker/ dealer, then-based in the Elizabeth on Bay Plaza on Bay Street, were allegedly used as “bait” by the Federal Bureau of Investigations (FBI) to help snare numerous international securities fraudsters.

Mr Gentile claimed that he and his Bahamian businesses were “forced” to play key roles in undercover ‘sting’ operations targeting criminals earning millions of dollars from market manipulation scams.

Their participation even extended to the ‘bugging’, both by video and sound, of MintBroker’s Bahamian head office in a successful bid to gain evidence against a Canadian fraudster who subsequently pleaded guilty to the charges against him.

He also attracted international media coverage after his Russian-born, model girlfriend, Kristina Kuchma, 24, in a fit of rage drove his Mercedes S400 hybrid into the pool at his Ocean Club home after he ended their 18-month relationship by text and allegedly reneged on a promise to provide $50,000 for one of her business ventures.

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 the 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 MintBroker for several months.