Haddon Twp. Man Fined $100K by State for Allegedly Defrauding Investors
Stanley Rosenzweig of qNETIQ, Inc. violated the state's uniform securities law, officials said.
Stanley Rosenzweig, 67, of Haddon Township, violated the state's Uniform Securities Law and has been fined $100,000 by the state, officials said Monday.
The state said Rosenzweig defrauded investors who purchased promissory notes from him. He did this by offering investors unregistered and non-exempt promissory notes in the company he founded and controlled, qNETIQ, Inc.
The New Jersey Division of Consumer Affairs' Bureau of Securities, located within the State Office of the Attorney General, assessed the fine.
“Unregistered people selling unregistered securities should set off immediate red flags to potential investors,” said Eric T. Kanefsky, acting director of the state Division of Consumer Affairs.
“The Bureau of Securities is a resource available to consumers who are performing their due diligence before deciding where to invest their hard-earned dollars.”
According to the bureau's summary order, Rosenzweig, the chairman of the board and president of qNETIQ, began offering the promissory notes in 2006, with promised rates of return ranging from 150 to 1,000 percent, plus the return of principal.
The bureau investigation revealed that the money raised from investors was not used to implement qNETIQ's business plan, as stated to them, but instead went for Rosenzweig's personal benefit.
His personal use of investors' funds included purchasing an Audi automobile for his daughter, jewelry purchases, and paying for a family vacation, dental expenses and rent. Some funds paid by new investors went toward paying some earlier investors, according to the summary order.
“Financial scams remain the leading white-collar crime across the nation. A lifetime of savings can be wiped out in an instant, and we continue our efforts to educate and empower investors against financial frauds,” Attorney General Jeffrey S. Chiesa said.
Rosenzweig defrauded more than 50 individuals who collectively invested approximately $1 million, according to the bureau.
Rosenzweig, who formerly operated qNETIQ from a Cherry Hill hotel suite before relocating to Haddon Township, also is president of Omega Storage, Inc. qNETIQ claims that it provides technology and infrastructure platform services, and Omega purportedly had a licensing agreement with qNETIQ.
In executive summaries that Rosenzweig provided to some investors, he failed to disclose:
any risks associated with investing in the promissory notes;
qNETIQ had generated little or no income by providing its purported technology and infrastructure platform services;
qNETIQ needed the money it obtained from selling the promissory notes in order to “stay afloat”;
prior investors who purchased the promissory notes had not been paid the interest and/or principal owed to them; and
- he used the money raised by the sale of the promissory notes for a variety of personal purposes.
In addition to the $100,000 civil penalty, the bureau sought and obtained a court order forcing Rosenzweig to cooperate with the investigation when Rosenzweig refused to respond to its investigative subpoena for documents and testimony.
“The Bureau of Securities expects individuals to respect the investigative powers given it under the Uniform Securities Law. We will seek judicial assistance when necessary to force such compliance,” said Abbe R. Tiger, chief of the NJ Bureau of Securities. “Rosenzweig made untrue statements and omitted material facts in his dealings with investors, with the planned purpose of defrauding investors. Investments that promise significantly higher rates of return than what are generally available should be viewed with a dubious eye.”
The summary order also requires Rosenzweig and qNETIQ to cease and desist from further violations of the uniform securities law.