According to FINRA, Jorge A. Reyes was barred from association with any FINRA member in all capacities and ordered to pay $4,009,000 in restitution to customers for engaging in fraud, making unsuitable recommendations, and converting customer funds.

Reyes violated Section 10(b) of the Securities Exchange Act and Rule 10b-5 by engaging in fraud when recommending and selling promissory notes to customers. He falsely told customers that the notes were safe investments like bonds when they were actually high-risk, illiquid investments carrying the risk of total loss. The marketing materials he created falsely represented that investor funds would be preceded by a comprehensive due diligence process when no such process existed or was performed.

The fraudulent conduct extended to misrepresentations about how investor funds could be used and the regulatory status of the offerings. Reyes's marketing materials contained false, exaggerated, and misleading statements and falsely implied that regulatory organizations endorsed the promissory notes. These materials violated FINRA Rule 2210's standards for public communications by failing to disclose the significant risks inherent in the notes.

Beyond fraud, FINRA found that Reyes made unsuitable recommendations to a customer by recommending that she invest more than half of her net worth in the high-risk promissory notes despite knowing she had a low risk tolerance and investment objectives focused on preserving assets and generating income. This violated FINRA Rule 2111's suitability requirements.

Most egregiously, Reyes converted funds from a customer who intended to use the money to establish an incubator fund and purchase a promissory note. Instead of using the funds for their intended purpose, Reyes transferred the money to his personal checking account and used it for personal expenses including rent, car payments, credit cards, groceries, personal trips, dining, shopping, alimony, and providing money to a relative of his girlfriend.

This case demonstrates multiple layers of serious misconduct—fraud in the offer and sale of securities, unsuitable recommendations, misuse of marketing materials, and outright theft through conversion. The $4 million restitution order reflects the substantial harm Reyes caused to customers who trusted him.

Investors should be extremely skeptical of promissory notes and other private placements, particularly when sold with marketing materials that minimize risks or make guarantees. Promises that investments are "safe like bonds" when they are actually high-risk should be immediate red flags. Customers should verify that due diligence has been performed, understand the liquidity and risks, and ensure recommendations match their risk tolerance and objectives.