← Broker database 2024-06-26
Sharif Azmi Sharif Suspended for Private Securities Transactions in Crypto Mining Investment
According to FINRA, Sharif Azmi Sharif was assessed a deferred fine of $5,000 and suspended from the securities industry 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 his firm.
Sharif was a founding investor in the crypto asset mining company. He and his business partner held an approximately one-hour video call with four firm customers to explore potential investments in the company. During the call, Sharif explained the business model, the amount the company hoped to raise, 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 Sharif participated.
Private securities transactions, commonly called "selling away," create significant risks for investors. When registered representatives solicit investments outside their firm's supervision, customers lose important protections including firm due diligence on the investment, suitability reviews, and oversight of sales practices. Many fraudulent investment schemes involve registered representatives who leverage their credibility and customer relationships to solicit investments in opportunities that have not been vetted by their firms.
The crypto asset mining investment did not succeed as planned. Before the company could reach its funding goal, it changed its business model, and customers complained to the firm. All seven customers either received refunds from or otherwise settled with the issuer, avoiding permanent losses. Sharif received no selling compensation in connection with the transactions, which distinguishes this case from selling away violations where the representative profits from undisclosed transactions.
Despite the lack of selling compensation and the customers' ultimate recovery of their funds, the violation is serious because Sharif used his position as a registered representative and his relationships with firm customers to solicit investments in a venture he was personally involved in, without giving his firm the opportunity to review the investment or supervise the transactions.
For investors, this case reinforces important principles about investments presented by your financial advisor. If your advisor suggests an investment opportunity, particularly one the advisor is personally involved in, ask these critical questions: Is this investment offered through your firm? Has your firm approved this investment? Has your firm conducted due diligence on this opportunity? If the answers are no, you are likely being solicited for a private securities transaction outside firm supervision.
Be especially cautious about investments in emerging areas like crypto assets, where valuations may be speculative, business models may be unproven, and regulatory protections may be limited. The fact that your advisor is personally invested does not mean the investment is appropriate for you or that it has been properly reviewed.
The nine-month suspension from July 1, 2024 through March 31, 2025 reflects that selling away is a serious violation even when the representative does not receive compensation and customers do not suffer permanent losses. The sanction emphasizes that providing prior written notice to the firm is not optional and that using customer relationships developed through a firm to solicit outside investments violates fundamental obligations.