← Broker database 2024-06-26
Azmi Sharif and Sharif Azmi Sharif Suspended for Private Securities Transactions in Crypto Mining Investment
According to FINRA, Azmi Sharif and Sharif Azmi Sharif (two individuals with similar names) were each suspended for nine months for participating in private securities transactions by facilitating approximately $900,000 in investments by eight individuals in a crypto asset mining company without providing prior written notice to their firm.
The Sharifs were founding investors in the crypto asset mining company (one was also an employee). They held an approximately one-hour video call with four firm customers to explore potential investments in the company. During the call, they explained the business model, the amount the company hoped to raise, the minimum investment, potential returns, and answered questions about the company.
Following the call, the customers and four of their family members—three of whom were also firm customers—collectively invested approximately $900,000 in securities for the purchase of crypto asset mining equipment and other purposes. These investments constituted private securities transactions that should have been disclosed to and approved by the firm before the Sharifs participated.
Private securities transactions, often called "selling away," are among the most common sources of investor harm in the securities industry. When registered representatives solicit customers to invest in opportunities away from their firm without disclosure and approval, the firm cannot supervise the transactions, conduct due diligence on the investment, or ensure the investment is suitable for the customers. Many investment frauds involve representatives who use their positions of trust to solicit customers into unregistered securities offerings outside firm supervision.
The investments did not work out as planned. Before the company could reach its funding goal, it changed its business model, and the customers complained to the firm. Fortunately, all seven customers either received refunds from or otherwise settled with the issuer, so they did not suffer permanent losses. Neither Sharif received selling compensation in connection with the transactions, which likely reduced the severity of the sanctions.
For investors, this case illustrates the risks of investing in opportunities presented by your financial advisor outside of the brokerage firm. Even when the advisor is personally invested and seems to genuinely believe in the opportunity, the investment may not be appropriate for you, may lack adequate disclosure, or may not perform as expected. The fact that the Sharifs were founding investors and employees of the company did not make the investments suitable for their brokerage customers.
Before investing in any opportunity presented by your financial advisor, ask whether the investment is offered through their firm, whether the firm has approved it, and whether the firm has conducted due diligence. If the answer to any of these questions is no, you are likely being solicited for a private securities transaction that could put you at risk.
The nine-month suspensions (July 15, 2024 through April 14, 2025 for Azmi Sharif, and July 1, 2024 through March 31, 2025 for Sharif Azmi Sharif) reflect the seriousness of selling away violations, even when customers ultimately did not suffer losses and the advisors did not receive selling compensation. The sanctions emphasize that prior written notice to the firm is not optional—it is a fundamental requirement that protects both firms and customers.