Fusion Analytics Securities LLC (CRD #124245, Coral Springs, Florida)

March 7, 2022 – The firm was named a respondent in a FINRA complaint alleging that it willfully violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder and violated FINRA Rule 2020 by engaging in securities fraud in connection with its sale of bonds in two private offerings for a company. In the alternative, the firm acted in contravention of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 by making negligent misrepresentations and omissions of material facts. The complaint alleges that at the time the firm agreed to sell the bond offerings, it knew that the SEC issued an order finding that a second company, of which the private offerings company was an affiliate, and an executive of both companies and a promoter of all the relevant offerings (“Promoter 1”), had misled investors about the use of proceeds raised in connection with earlier equity offerings for the second company. The SEC’s order found that the second company and Promoter 1 diverted millions of dollars of investor funds from the company to a promoter and his family, who owned and controlled the private offerings company and controlled the second company. The firm’s own customers were misled in the prior equity offerings of the second company. Nonetheless, the firm agreed to sell the bond offerings, purportedly to raise money for the building of a power plant. However, in selling the bond offerings the firm intentionally or recklessly made material misrepresentations and omissions and, separately, disseminated documents it knew or was reckless in not knowing contained material misstatements and omissions. The firm disseminated false and misleading statements and made its own misleading statements that failed to disclose the SEC’s order and its findings that the second company and Promoter 1 misled investors and misdirected investment proceeds. The firm also disseminated false and misleading statements, and made its own misstatements regarding the risks and anticipated revenue of the project being funded by the offerings, and made false and misleading statements regarding progress of the offering and construction of the power plant that was the subject of the offering. In addition, the firm disseminated materials that failed to disclose that the issuer was in financial distress, was late on interest payments, was in violation of debt covenants, and needed to raise funds to pay interest to prior investors. In total, the firm raised approximately $1.8 million from customers through the bond offerings, and it generated $146,000 in commissions. The complaint also alleges that the firm did not have a reasonable basis to believe that the offerings were suitable for a least some investors because it failed to conduct a reasonable investigation of the offerings prior to recommending them to investors. The firm failed to exercise reasonable diligence despite the existences of numerous red flags. The complaint further alleges that the firm provided false information to FINRA in response to its requests for information concerning the second bond offering. FINRA sent a request to the firm for information seeking copies of private placement memorandums, a purchase and sales blotter, subscription agreements, customer profile information, and other information. The firm responded by providing a sales blotter identifying only one sale of $80,000 of one private placement offering to one customer. This response was false because the firm had sold at least $600,000 of the that offering. FINRA later issued a second request for information seeking an update of the firm’s initial response, but the firm indicated there was no new information to provide. This response was false because as of the date of the second request, the firm had sold at least $870,000 of the second bond offering in addition to the investment previously disclosed to FINRA. (FINRA Case #2018059545604)