ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND

Transcription

1 ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND IN THE MATTER OF: * MATTHEW A. KRIMM * Securities Docket No and KRIMM FINANCIAL SERVICES, LLC * and OAH No. OAG-SD MBA MORTGAGE SERVICES, INC., * RESPONDENTS. * * * * * * * * * * * * * * * CONSENT ORDER AS TO RESPONDENTS MATTHEW KRIMM, KRIMM FINANCIAL SERVICES LLC, AND MBA MORTGAGE SERVICES, INC. WHEREAS, the Maryland Securities Commissioner ( Commissioner ), pursuant to the authority granted in of the Maryland Securities Act, Title 11, Corporations and Associations Article, Annotated Code of Maryland (2014 Repl. Vol.) ( Securities Act or Act ), initiated an investigation into the activities of Matthew A. Krimm, Krimm Financial Services, LLC, Adam Duso, Kairos Capital, LLC, 1 MBA Mortgage Services, Inc., and David C. Connelly; and WHEREAS, on the basis of that investigation the Commissioner found grounds to allege that Matthew Krimm, Krimm Financial Services, LLC., and MBA Mortgage Services, Inc. (hereafter Respondents ) had engaged in acts or practices constituting violations of the securities registration and antifraud provisions set forth at , , and of the Act; and 1 Following issuance of a Summary Order To Cease And Desist by the Commissioner, Respondents Krimm, Krimm Financial, and MBA Mortgage Services, Inc., requested a hearing. The matter as to them was referred to the Maryland Office of Administrative Hearings for further proceedings. Adam Duso and Kairos Capital, also named as Respondents in the Securities Commissioner s Summary Order To Cease And Desist, entered into a Consent Order with the Commissioner and no longer are parties in this matter. David Connelly also requested a hearing, and that matter is proceeding separately.

2 WHEREAS, pursuant to (a) of the Securities Act, on March 18, 2015, the Commissioner issued a Summary Order To Cease And Desist And Order To Show Cause ordering each Respondent to show why that Respondent should not be found in violation of the Act, to show why a fine of up to $5,000 per violation should not be imposed upon that Respondent, and to show why that Respondent should not permanently be barred from engaging in the securities business in Maryland; and WHEREAS, before the holding of a hearing in this matter, without trial or final adjudication of any issue of fact or law, and upon consent of the parties hereto, the Commissioner and the Respondents have reached an agreement to resolve this matter and all pending proceedings arising from the facts underlying this proceeding; and WHEREAS, without admitting or denying any of the Securities Commissioner s findings of fact or conclusions of law, except that each Respondent consents to the jurisdiction of the Commissioner in this matter and over that Respondent, to the Statement of Facts herein, and to the terms of this Order; and WHEREAS, in settlement of any proceeding that could be brought based upon Respondents violation of the Act, the Commissioner has determined that it is in the public interest to issue this Consent Order; and WHEREAS, Respondents have agreed to the provisions set forth below; THEREFORE, IT IS HEREBY AGREED AND THE COMMISSIONER ORDERS: I. JURISDICTION 1. The Commissioner has jurisdiction in this proceeding and over Respondents pursuant to of the Securities Act. 2. Each Respondent permanently waives the right to a hearing and appeal under the Act and the rules and regulations promulgated thereunder with respect to this Consent Order and the underlying Summary Order. 3. If judicial intervention in this matter is sought by any party, each Respondent consents to - 2 -

3 the jurisdiction of the Circuit Court for Baltimore City over any such proceeding and as to that Respondent. II. PARTIES 4. Melanie Senter Lubin is the Securities Commissioner for the State of Maryland. 5. Matthew A. Krimm and his companies, Krimm Financial Services, LLC ( Krimm Financial ) and MBA Mortgage Services, Inc., an affiliated company ( MBA Mortgage ), a Delaware limited liability company and corporation, respectively, are presently located in Abingdon, Maryland. At times relevant to the facts contained in this Order, Krimm and Krimm Financial were located in Delaware. III. STATEMENT OF FACTS 6. In the Fall of 2012, CES of Hagerstown, Maryland, discussed with David Connelly, his mortgage broker, an interest in acquiring more financing. Connelly suggested CES look into a note issued by Krimm that, Connelly claimed, offered an above-market rate of return. CES knew Connelly, who had arranged for a refinance of CES s home through MBA Mortgage. 7. Connelly provided CES with written wiring instructions to send Krimm money for a note, and an undated note stating, Got you a better deal! 15K - you get back $17, On or about October 1, 2012, Connelly provided CES with a letter asking him to provide a check payable to Matthew A. Krimm to make the investment, and with it a signed promissory note for Connelly to pick up from CES s home. 9. CES decided to wire his investment monies to Krimm rather than to write a check. On or about October 4, 2012, Connelly accompanied CES to his credit union when CES wired the funds from the credit union account to a bank account in the name of Matthew Allen Krimm of Krimm Financial. 10. In October of 2012, CES received a Secured Promissory Note signed by Krimm on September 27, The note promised to pay CES [t]he sum of $15,000 with interest from September 6th, 2012, on the unpaid principal at the fixed rate of $1,500 ($17,500 total) on or before October 18, The promissory note claimed that the note was secured by two vehicles, a Ford Escape and - 3 -

4 a Chrysler Pacifica, and VIN numbers were listed. No information was provided, however, showing that any legally valid securitization had been effected in favor of CES with respect to those vehicles. 12. The note also stated that Borrower agrees for lender [CES] to garnish wages from MBA Mortgage... in event of default and that the borrower will also name lender as beneficiary of a life insurance policy with Baltimore Life to cover the amount of the note in the event of borrower s death. 13. Before the end of 2012, Connelly wrote to CES stating that he was enclosing a $2,500 check for interest on the loan. He asked CES to provide him with a copy of the note signed in September 2012, to give to Krimm. He stated that Krimm planned to have another $1,500 paid back to CES by January In 2013, Connelly suggested that CES invest additional monies with Krimm and Krimm Financial, and to roll over the $15,000 in principal due from the September 2012 note into another note for $45,000. CES withdrew $30,000 from an annuity to use to acquire the note. 15. In deciding to invest his annuity proceeds, CES relied upon assurances from Connelly that Krimm and Krimm Financial would pay CES transaction expenses, which included taxes and surrender charges arising from the annuity withdrawal totaling approximately $17,000. CES never received any reimbursement for those costs, however. 16. To memorialize his second investment, CES received a Promissory Note signed by Krimm on March 5, The note promised to pay CES a return of principal upon demand but not before December 31, No rate of return was specified but the note required payments of $1, to CES on th or before the 25 of each month. 17. The note also memorialized that Krimm and Krimm Financial would reimburse CES for approximately $17,000 in expenses associated with the surrender of his annuity. 18. CES received six payments of $1, pursuant to the terms of the first two notes. Some of those payments were made in cash or by money order. 19. Krimm advised CES that the December 2013 payment would be the last CES would receive - 4 -

5 from him and Krimm Financial. Krimm stated that he had sold Krimm Financial to Adam Duso of Kairos Capital. He further stated that all future payments on the $45,000 Krimm Financial note would be made through Kairos Capital. 20. In January 2014, CES received a letter from Adam Duso, advising that Krimm Financial did not have the ability to repay the investments it offered and sold, and that Kairos Capital was stepping in to make good on the investments. 21. To date, CES is owed approximately $45,000 in principal on the notes executed in his favor, as well as the expenses he incurred by making a partial surrender of his annuity. 22. The Securities Division has no record of any securities registration, or claim of exemption or status as federal-covered securities, issued under the name Krimm Financial or Kairos Capital in connection with the offer and sale of such notes. 23. Neither Respondents nor Connelly disclosed to CES that none of them is registered to offer and sell securities, or that the securities in the form of notes were not registered, exempt from registration or qualified as federal-covered securities. Nor did any of them provide CES with a prospectus or other disclosure document in connection with the Krimm note investments. 24. Krimm is not registered with the Securities Division as a broker-dealer, securities agent, investment adviser or investment adviser representative. 25. Krimm Financial Services is not registered with the Securities Division as a broker-dealer, securities agent, investment adviser or investment adviser representative. 26. MBA Mortgage Services is not registered with the Securities Division as a broker-dealer, securities agent, investment adviser or investment adviser representative. 27. Connelly is not registered with the Securities Division as a broker-dealer, securities agent, investment adviser or investment adviser representative

6 IV. CONCLUSIONS OF LAW 28. The notes are securities under the of the Securities Act in the form of promissory notes and investment contracts. 29. Respondents violated of the Securities Act by offering or selling unregistered securities in Maryland in the form of investment contracts or promissory notes, for which no claim of preemption or exemption has been filed. 30. Respondents violated of the Securities Act by acting as unregistered agents in offering and selling securities in Maryland. 31. Respondents violated of the Securities Act by employing unregistered agents in the offering or selling of securities in Maryland. 32. Respondents violated of the Act by making material misrepresentations and omissions in connection with the offer or sale of securities, including failing to disclose their financial status, the degree of risk, the use of invested funds, and the source of anticipated profits. V. ORDER IT IS HEREBY ORDERED, and Respondents expressly consent and agree that: 33. Respondents permanently cease and desist from offering or selling securities in Maryland in violation of the Securities Act, from offering and selling any securities whether registered or exempt from registration, and from engaging in any transaction exempted under the Act; and it is further ORDERED that 34. Respondents are barred from engaging in the securities and investment advisory business in Maryland for or on behalf of others, or from acting as a principal or consultant in any entity so engaged; and it is further ORDERED that 35. (a) Respondents, joint and several, are assessed a civil penalty of $45, for violations of the Securities Act pursuant to (b) of the Act, payable by certified check to the Office of the Attorney General. However, collection of that penalty is stayed on condition, reduced dollar for dollar for - 6 -

7 amounts paid pursuant to this Consent Order, and waived upon fulfillment of the conditions, that: (i) Respondents reaffirm the debt of $45,000 to CES and will not seek to discharge it in bankruptcy; and (ii) Matthew Krimm repays $45,000 to CES at the minimum rate of $200 per month, beginning at the date of entry of this Order, which plan, according to Counsel for Respondents, the Bankruptcy Trustee has endorsed and will submit for Bankruptcy Court approval; and (iii) Each year on or about November 1, Matthew Krimm files a statement with the Securities Division showing the amount paid pursuant to 35(a)(ii) above in the previous 12 months; and (b) Krimm agrees and consents that failure to make monthly payments may be considered by the Securities Commissioner as a violation of this Consent Order ( 38 below). In that case the Commissioner may proceed to collect the penalty imposed, which pursuant to 11 U.S.C. 523(a)(19) is not dischargeable. Any such payments so collected may be used, in the Commissioner s discretion, to make restitution. VI. OTHER PROVISION 36. Respondents agree not to take any action, make or permit to be made any statement denying, directly or indirectly, any allegation in the Summary Order or the activities upon which this Order is based, as referred to herein. Respondents further agree not to take any action or make any statement which creates or tends to create the impression that this Consent Order is without factual basis. While Respondents are not required to admit any allegation in the Summary Order or other activities upon which this Order is based, nothing in this provision affects Respondents testimonial obligations. Nor does this provision affect Respondents right to take positions in litigation to which neither the Division nor the Securities Commissioner is a party. 37. This Order fully resolves all issues now pending between the Respondents and the Securities Commissioner arising in connection with the Commissioner s Summary Order. Respondents will dismiss or withdraw any Complaint filed or to be filed with any Maryland circuit court

8 VII. CONSEQUENCES OF VIOLATION OF CONSENT ORDER 38. If any Respondent fails to comply with any term of this Consent Order, the Commissioner may declare this Consent Order to be null and void. The Commissioner may then proceed with full administrative and/or judicial proceedings to enforce this Consent Order against that Respondent, or to sanction that Respondent for violating an order of the Commissioner, and may take any other action authorized under the Act or any other applicable law. In any such proceeding, the facts and the violations of the Act set forth and incorporated in this Consent Order shall be deemed admitted and may be introduced into evidence against that Respondent. VIII. MODIFICATION OF TERMS OF THIS CONSENT ORDER 39. The terms of this Consent Order may only be modified by a subsequent order issued by the Securities Commissioner. IX. JURISDICTION RETAINED 40. Jurisdiction shall be retained by the Commissioner for the purpose of enabling any party to this Consent Order to apply for such further orders and directions as may be necessary or appropriate for the construction or enforcement of this Consent Order. 41. The provisions of this Consent Order shall become binding when this Consent Order has been executed by all Respondents and is issued by the Commissioner. IT IS SO ORDERED: Commissioner s Signature on File w/original Document October 16, 2015 MELANIE SENTER LUBIN Securities Commissioner - 8 -

9 CONSENTED TO: MATTHEW A. KRIMM KRIMM FINANCIAL SERVICES, LLC By: Matthew A. Krimm Print name October, 2015 MBA MORTGAGE SERVICES, INC. An Affiliated Company By: Matthew A. Krimm Subscribed and sworn to before me this day of, Notary Public My Commission Expires - 9 -