Goldstone Financial Group, Llc

Allegations: VIOLATION OF IDAHO CODE 30-14-502 BY MAKING AN UNSUITABLE RECOMMENDATION OF AN UNREGISTERED SECURITY TO ONE CLIENT WHO RESIDES IN IDAHO. Status: Final Sanction Detail: FINE PAID IN FULL ON 2/4/2022 Summary: IN 2017 A RECOMMENDATION WAS MADE TO A HUSBAND AND WIFE WHO HELD AN INSURANCE RELATIONSHIP SINCE 2013 AND HELD AN ADVISORY RELATIONSHIP WITH THE FIRM SINCE 2015. WHEN THE RELATIONSHIP BEGAN THEIR RESIDENCE WAS IN ILLINOIS. SHORTLY BEFORE THE RECOMMENDATION WAS MADE OF THE SECURITY IN QUESTION THE COUPLE RELOCATED TO IDAHO. THE HOUSEHOLD REMAINS A CLIENT AND CONTINUES TO BE ADVISED BY THE FIRM ON THEIR INVESTMENTS.

Allegations: ON MARCH 28, 2022, THE FIRM AND ITS OWNER AND PRINCIPAL, ANTHONY PELLEGRINO, WERE THE SUBJECT OF AN ORDER INSTITUTING ADMINISTRATIVE AND CEASE AND DESIST PROCEEDINGS (THE "ORDER") ENTERED BY THE SEC, TO WHICH THEY PREVIOUSLY CONSENTED WITHOUT ADMITTING OR DENYING THE FINDINGS THEREIN, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS AND A CEASE AND DESIST ORDER FROM AND BASED ON VIOLATIONS OF SECTION 206(2) OF THE INVESTMENT ADVISERS ACT OF 1940 AND SECTIONS 5(A) AND (C) OF THE SECURITIES ACT OF 1933. Status: Final Sanction Detail: CENSURE OF FIRM AND ANTHONY PELLEGRINO, CIVIL MONETARY PENALTY OF $70,000 PAYABLE BY THE FIRM, CIVIL MONETARY PENALTY OF $30,000 PAYABLE BY ANTHONY PELLEGRINO, BAR OF MICHAEL PELLEGRINO FROM AFFILIATION WITH INVESTMENT ADVISER AS OF MARCH 28, 2022, CIVIL MONETARY PENALTY OF $50,000 PAYABLE BY MICHAEL PELLEGRINO. Summary: AS DETAILED MORE FULLY IN THE ORDER, THIS MATTER ARISES FROM THE PERIOD MAY 2017 THROUGH JUNE 2018, DURING WHICH TIME THE FIRM, ANTHONY PELLEGRINO AND MICHAEL PELLEGRINO, A FORMER MANAGER AND OWNER DISCUSSED BELOW, OFFERED AND SOLD AN INVESTMENT OF A THIRD PARTY COMPANY CALLED 1 GLOBAL CAPITAL (1GC), WHICH FILED FOR BANKRUPTCY IN JULY 2018, AFTER WHICH THE SEC CHARGED 1GC AND ITS OWNER WITH OFFERING AND SELLING 1GC INVESTMENTS AS UNREGISTERED SECURITIES, WHERE THERE WAS NO APPLICABLE EXEMPTION FROM REGISTRATION, AS WELL AS MISREPRESENTATIONS REGARDING AMONG OTHER FACTS, THE USE OF INVESTOR FUNDS, THE VALUE OF THE INVESTMENTS AND THAT THE 1GC INVESTMENTS WERE EXEMPT FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES LAWS. 1GC AND ITS PRINCIPAL OWNER SUBSEQUENTLY SETTLED THE SEC'S CHARGES AGAINST IT. NEITHER THE FIRM, ANTHONY NOR MICHAEL PELLEGRINO WERE AWARE OF 1GC'S MISREPRESENTATIONS AND INDEED WERE THEMSELVES MISLEAD BY 1GC AND ITS OUTSIDE SECURITIES COUNSEL. IN THIS REGARD, 1GC OBTAINED OUTSIDE SECURITIES COUNSEL WHO PREPARED FALSE LEGAL OPINIONS AND WHO FALSELY MISREPRESENTED TO MICHAEL AND ANTHONY THAT THE 1GC INVESTMENT RETURNS WERE VALIDATED BY AN INDEPENDENT ACCOUNTING FIRM AND TOUTED LEGAL OPINIONS AUTHORED BY OUTSIDE COUNSEL THAT THE 1GC INVESTMENTS WERE NOT CONSIDERED SECURITIES SUBJECT TO REGISTRATION. IN RELIANCE UPON 1GC AND 1GC'S OUTSIDE SECURITIES COUNSEL, AND DESPITE EFFORTS TO CONDUCT THEIR OWN RESEARCH AND ANALYSIS REGARDING 1GC AND ITS INVESTMENTS INCLUDING IN-PERSON MEETINGS AT 1GC, NUMEROUS COMMUNICATIONS WITH 1GC AND ITS OUTSIDE SECURITIES COUNSEL, THE FIRM, ANTHONY PELLEGRINO AND MICHAEL PELLEGRINO OFFERED AND SOLD THE UNREGISTERED 1GC SECURITIES BETWEEN MAY 2017 AND JUNE 2018 TO GOLDSTONE CLIENTS AS AN ALTERNATIVE INVESTMENT PRODUCT FOR THEIR CLIENTS' INVESTMENT PORTFOLIOS. IN DOING SO, THE FIRM, ANTHONY, AND MICHAEL ALSO DID NOT ADEQUATELY DISCLOSE THE FEES THEY RECEIVED FROM 1GC TO THEIR ADVISORY CLIENTS INCLUDING THAT THEY RECEIVED REFERRAL FEES FOR REFERRING CLIENTS TO 1GC, THE DISCLOSURE OF WHICH WOULD HAVE BEEN IMPORTANT IN DECIDING WHETHER TO INVEST IN THE 1GC INVESTMENT. AFTER 1GC FILED FOR BANKRUPTCY AND WAS CHARGED BY THE SEC, THE FIRM AND ANTHONY PROVIDED FUNDS TO FACILITATE A SETTLEMENT WITH ALL ITS CLIENTS WHO INVESTED IN 1GC, RETURNING THE REFERRAL FEES RECEIVED FROM 1GC IN ADDITION TO INSURANCE PROCEEDS. THE FIRM AND ANTHONY ALSO ASSISTED ITS CLIENTS AT THEIR EXPENSE TO FILE PROOFS OF CLAIM IN THE 1GC BANKRUPTCY. THE FIRM ALSO HIRED A NEW CHIEF COMPLIANCE OFFICER (WHO IS STILL HERE), CREATED A NEW DUE DILIGENCE COMMITTEE TO REVIEW AND APPROVE NEW INVESTMENT PRODUCTS, REVISED RELEVANT POLICIES AND PROCEDURES INCLUDING PROHIBITIONS ON OFFERING ANY UNREGISTERED SECURITIES. IN ENTERING THE ORDER, THE SEC CONSIDERED THE FIRM'S AND ANTHONY'S REMEDIAL EFFORTS PROMPTLY UNDERTAKEN AND COOPERATION AFFORDED THE SEC.