Massachusetts Secretary of State William F. Galvin on Tuesday accused a Chelsea broker of defrauding at least 40 investors of an estimated $1 million over six years by selling them purported high-interest bonds and promising to deliver shares of Facebook’s initial public offering.
Galvin’s office charged Gary J. Martel with selling unregistered investments to Massachusetts residents and said Martel and his firms — Martel Financial Group of Woburn and Chelsea, and Martel Financial Services and MFG Funding, both of Chelsea — were not licensed with the state.
After receiving complaints from investors, some of them retired and one Martel’s own former assistant, Galvin’s Securities Division sent investigators to Chelsea to serve the broker with a subpoena. When Martel appeared before the division, he repeatedly invoked his Fifth Amendment protection against self-incrimination, including when asked whether he had ever used another name.
According to the state’s civil complaint, Martel’s lawyer wrote to the regulators saying the broker was “unable to make payments due some 40 customers who purchased various forms of investment vehicles.” The attorney estimated the losses “well into seven figures.” The firm has shut down, she wrote, and is in the process of assessing its assets and liabilities. “For that reason, there are currently no funds available for distribution.”
In an interview, Carol Starkey, the lawyer for Martel, said, “Mr. Martel, as he has told his customers, is greatly distressed by this situation.” She also said her client “denies any wrongdoing here and will be responding in due course to the allegations made in the administrative complaint.”
Martel is charged with five counts of violating state securities laws, civil violations that carry fines and other administrative remedies.
According to the Securities Division, Martel told investors he was offering short-term bonds that renewed every 90 days. But many of his investors did not receive interest payments, and got only partial returns of their principal.
“Martel repeatedly conjured up one excuse after another for not being able to pay his investors,” the complaint said.
He allegedly cited health issues as an excuse, invoked his faith, and blamed his bank for bounced checks, according to the complaint. As time went on, and more investors tried to get their money back, “Martel’s widespread scam began to unravel, until eventually Martel stopped returning their calls and hired counsel,’’ the state said.
In April, in what appeared to be his last effort to raise funds, Martel sent a 15-page IPO presentation to some investors, trying to drum up interest in Facebook shares.
The state is seeking a cease-and-desist order against Martel and his companies, an accounting of all proceeds received, an offer of compensation to investors for losses, an administrative fine, and a bar against Martel acting as a broker-dealer or investment adviser in Massachusetts in the future.