FINRA Sanctions Ex-LPL Broker Accused of Raising $815,000 for Fraudulent Tequila Company
FINRA suspends and fines former LPL broker for participating in private securities transactions without approval.
The Financial Industry Regulatory Authority has suspended and fined Michael Mandel, a former LPL broker, for allegedly soliciting 18 investors, seven of whom were firm customers, to invest approximately $815,000 in a fraudulent tequila company.
Mandel purportedly invited investors to promotional events for the company, introduced them to the company’s founder, and provided documents about the investment “opportunity.” He received $5,600 from the tequila company and expected to receive a portion of the founder’s equity.
In November 2021, Joseph Cimino, founder of 6 Degree Tequila LLC, pled guilty to charges brought by the U.S. Attorney for the Southern District of New York that he made false and misleading statements to investors and misused their funds for personal expenses, including groceries, pet supplies, and entertainment. He awaits sentencing in federal court for securities and wire fraud and could face up to 40 years in prison.
At the time of his arrest, U.S. Attorney Audrey Strauss said, “Joseph Cimino allegedly raised nearly $1 million in investor funds for his start-up tequila company by lying about the company’s finances, and then spent a significant portion of that money to finance his own lifestyle.”
From 2014 to 2018, Cimino purportedly raised $935,000 from at least 25 investors to fund the company.
According to his BrokerCheck profile, Mandel joined LPL in 2015 and spent six years at the firm before being discharged earlier this year for selling away. Prior to LPL, he spent seven years at Royal Alliance Associates.
During the relevant period, Royal Alliance and LPL each prohibited registered representatives from participating in private securities transactions. FINRA claims that Mandel did not provide written notice to either firm prior to participating in the transactions, nor did he receive approval from either firm.
Additionally, Mandel is accused of falsely stating on LPL’s 2016 annual compliance questionnaire that he had not participated in private securities transactions outside of the firm.
FINRA suspended Mandel for seven months and ordered him to pay a $5,000 fine and disgorgement of $5,600 plus interest. He signed FINRA’s settlement letter without admitting or denying the allegations.
