New Jersey Attorney General and Division of Consumer Affairs Announce Bureau of Securities Lawsuit Against Bergen County Companies and Their CEO/Managing Member for Alleged Investor Fraud
NEWARK – The New Jersey Bureau of Securities, within the State Division of Consumer Affairs, has filed suit against an Allendale-based company, its top executive and his wife, and two other business entities, alleging that nearly 800 investors were defrauded of approximately $9.5 million through the sale of unregistered stock and notes and the subsequent misuse of the invested funds.
Thomas J. Fagan ("Fagan"), President and CEO of Energex Systems, Inc., allegedly violated the State’s Uniform Securities Law by using the funds raised from investors for personal expenses for himself and his wife, Candace Fagan. Fagan was not registered as an agent with the N.J. Bureau of Securities when he sold approximately $9.5 million in unregistered Energex stock.
The State’s nine-count Complaint and Order to Show Cause, filed in State Superior Court in Hackensack, names as defendants Fagan; Candace Fagan; Energex Systems, Inc.; Arbios Acquisition Partners, LLC; and Arbios Systems, Inc.
Fagan founded Arbios Acquisition Partners in 2009 to gain control of Arbios Systems, Inc., and allegedly sold unregistered ASI promissory notes and ASI stock to investors. According to the Complaint, Fagan allegedly commingled investors’ funds among the entities he controlled and misused approximately $2.3 million for his personal benefit and enrichment.
"The complaint outlines how Fagan allegedly used investors’ hard-earned money as his personal piggy bank, misspending corporate funds for personal travel to Atlantic City and Las Vegas casinos and to see the Olympics in Europe," Attorney General Paula T. Dow said. "We are bringing this action to hold Fagan accountable."
The state is seeking court approval to freeze the defendants’ assets and the appointment of a receiver, as well as enjoining Fagan from engaging in any securities-related activity. According to Delaware records, where the defendant businesses were incorporated or formed, Energex is no longer in existence. Arbios Acquisition Partners exists but is not in good standing. Arbios Systems, Inc. exists and its stock is traded on the Over-the-Counter Bulletin Board (OTCBB).
"As alleged in our Complaint, Fagan cheated investors by distorting the line between his personal and business expenses, misappropriating investor money that he controlled. Through this lawsuit, we’re seeking to place Fagan on the hook for his actions and put an end to the investor deception," said Thomas R. Calcagni, Director of the State Division of Consumer Affairs.
Energex Systems, Arbios Acquisition Partners, and Arbios Systems, Inc., all listed the same Allendale address as their business location. Energex Systems, formerly known as Orthomedics and Orthosonix, claimed to be in the business of various biotech products, including ones related to blood safety.
"Investors need to be alert to persons who are violating New Jersey’s Securities Law by offering and selling securities without proper registrations. The Bureau of Securities can assist investors in performing due diligence," said Abbe R. Tiger, Bureau Chief. "The Bureau of Securities will do everything in its power to be vigilant in shutting down fraud schemes, but we need to hear from those who believe they may be victims."
The Bureau of Securities can be contacted toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600. The Bureau's website is located at www.njsecurities.gov.
Rudolph G. Bassman, Chief of Enforcement for the Bureau of Securities, conducted the investigation of this case. Deputy Attorneys General Victoria A. Manning and Paul E. Minnefor of the Securities Fraud Prosecution Section in the Division of Law, are representing the Bureau.