Having listed cryptocurrency in its 2018 Regulatory and Examination Priorities Letter, FINRA sanctioned broker Arthur Robert Meunier-Breitman, formerly of Morgan Stanley, for violations related to soliciting investments in a virtual product known as Tezos, a blockchain technology.
FINRA specifically sanctioned Breitman for failing to notify Morgan Stanley that he engaged in outside business activities, falsely attesting on firm questionnaires that he had disclosed all of his outside business activities to the firm, and for distributing Tezos-related sales materials to potential investors that failed to comply with FINRA's fair-and-balanced content standards.
The findings state that Breitman (CRD #5726300) began development of Tezos in 2014, launching a website, Twitter account, and publishing position papers under the pseudonym "LM Goodman," further using the Goodman name via e-mail for Tezos-related correspondence. Investigators concluded that in using the LM Goodman pseudonym to promote Tezos on its website, Twitter, and in other papers, Breitman effectively concealed his involvement with Tezos from Morgan Stanley.
As to his communications with the public, investigators found that Breitman distributed a Business Plan for Tezos contained potentially misleading statements, inadequately disclosed risk factors related to Tezos' speculative nature, and violated additional FINRA rules related to fair and balanced communications, such as a prohibition on making false, exaggerated, unwarranted, promissory misleading statements or claims, and a prohibition related to predicting or projecting performance.
FINRA wrote that Breitman only publicly associated himself with Tezos after he had already left Morgan Stanley, and after he had already made false statements on compliance questionnaires, and cited his experience at Morgan Stanley in crafting Tezos' business plan, proposing a $200,000 per year salary for himself as Tezos CEO, and forming Dynamic Ledger Solutions, Inc. in affiliation with Tezos.
Tezos has run into financial peril, as some investors have sued Tezos, alleging that the cryptocurrency fundraising operation attempted to violate US securities laws. The suit alleges that Dynamic Ledger Solutions, which Breitman, wife Kathleen, and San Mateo-based venture capitalist Timothy Cook Draper own or control, misled investors regarding Tezos in its sales of cryptocurrencies Bitcoin and Ethereum for over $232 million.
Draper (CRD #1303568) was last associated with FINRA-member firm Xpert Securities, Inc., which he left in 2013. His employments at the time included Xats, Inc., and SEC-registered Draper Fisher Jurveston Management LLC (CRD #162461), both of northern California. Draper founded the Silicon Valley-based for-profit school, Draper University, in 2012.
As NASAA predicted back in 2014, digital currencies—including cryptocurrency and blockchain technologies—are risky business. If you have invested with former Morgan Stanley broker Arthur Robert Meunier-Breitman in Tezos and have suffered losses or other harm as a result of misleading statements, exaggerated claims, or other unwarranted solicitations and projections that were not fair and balanced, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.