OLYMPIA – The Washington State Department of Financial Institutions (DFI) Securities Division obtained a Consent Order from King County resident Michael Robert Mastro today. Without admitting or denying any violations, Mastro agrees to cease and desist from violating the registration and the anti-fraud provisions of the Securities Act of Washington.
DFI alleges that for more than 20 years, Mastro, a Seattle-area real estate developer, sold promissory notes to raise business operating capital. Mastro may have sold more than $100,000,000 worth of notes to more than 175 investors. Mastro was never registered as a securities broker-dealer or securities salesperson.
DFI’s investigation found that Mastro engaged in numerous violations of the Securities Act by misleading investors about how he would use their funds and how safe and liquid their funds would be. Most of the promissory notes Mastro sold were not secured by real property. DFI found Mastro led investors to believe they could get their money back on demand.
“This case demonstrates the harm that can be done when investors invest in unregistered and unsecured promissory notes,” DFI Division of Securities Director Michael Stevenson said. “Without full disclosure of all the facts, investors cannot accurately evaluate the risk posed by such investments. Mike Mastro provided virtually no disclosure.”
In a statement of charges issued Oct. 9, 2009, DFI alleged many things were hidden from investors, including:
- Mastro’s business and financial information;
- The liquidity crisis within his real estate business; and
- The number of bank loans and projects in which he was involved.
DFI also alleged Mastro caused some investors to believe their investments were secured by real estate or by his personal insurance policies.
The Consent Order revokes Mastro’s exemptions for the future offer and sale of certain securities. The Consent Order also imposed a fine of $100,000, payment of which is deferred until the Mastro promissory note investors have been repaid in full. Mastro waived his rights to a hearing and to judicial review of the matter.