Oregon Securities Default Order - Blue Ocean Capital

STATE OF OREGON 2 DEPARTMENT OF CONSUMER AND BUSINESS SERVICES DIVISION OF FINANCIAL REGULATION 3 4 : Case No. S-26-0012 5 FINAL ORDER TO CEASE AND DESIST, FINAL ORDER DENYING 6 USE OF EXEMPTIONS, FINAL ORDER ASSESSING CIVIL PENALTIES, AND 7 FINAL ORDER ORDERING RESTITUTION, ENTERED BY 8 Respondents. DEFAULT 9 AS AGAINST RESPONDENT BLUE OCEAN CAPITAL LLC ONLY 10

11 On February 17, 2026, the Director of the Department of Consumer and Business 12 Services for the State of Oregon (“Director”), by and through the Division of Financial 13 Regulation (“Division”), served an Order to Cease and Desist, Proposed Orders Denying 14 Use of Exemptions, Assessing Civil Penalties, and Ordering Restitution, and Notice of 15 Right to an Administrative Hearing (“Notice”) on Andrew Mason (“Mason”) and Blue 16 Ocean Capital LLC (“Blue Ocean”) (collectively, “Respondents”).

17 The Notice offered Respondents an opportunity for a hearing if requested within 20

18 days of service of the Notice. The Notice informed Respondents that, subject to exceptions, -4387

-3881 19 any hearing request submitted on behalf of a corporation, partnership, limited liability

20 company, unincorporated association, trust or governmental body (“Entity Respondent”) 21 by a person that was not licensed to practice law in Oregon must be ratified, in writing, by 22 a person that is allowed to practice law in Oregon within 28 days from the day the hearing In the Matter of 23 request was received by the Director. The Notice informed Respondents that a hearing 1ANDREW MASON, an 24 Individual, and BLUE OCEAN request that was not properly ratified would be deemed invalid. CAPITAL LLC, a Dissolved South 25 Dakota Limited Liability /// Company, 26

See Oregon Administrative Rules 137-003-0550(2) and (4). 1

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1 The Notice further informed Respondents that any Respondent that did not file a 2 timely hearing request will have waived their right to a contested case hearing, and that if 3 a hearing was not conducted against them because they did not timely request a hearing or 4 otherwise defaulted then the designated portion of the Division’s file and all materials 5 submitted by Respondents in this case would automatically become part of the contested 6 case record for the purpose of proving a prima facie case. 7 On February 27, 2026, Mason submitted written hearing requests to the Division 8 for Respondents. Mason is not licensed to practice law in Oregon. 9 Blue Ocean failed to have its hearing request ratified within 28 days, or at all, and 10 its hearing request has been deemed invalid. 11 After considering the relevant portion of the Division’s file in this matter, the 12 Director finds that the record proves a prima facie case as against Blue Ocean, such that an 13 Order of Default may be entered against Blue Ocean only. 14 FINDINGS OF FACT 15 The Director FINDS that: 16 1. Blue Ocean was a South Dakota limited liability company with a principal place

17 of business at 25 First Ave. SW, Suite A, Watertown, South Dakota 57201. 2

18 2. At all relevant times, Mason resided in Oregon. -4387

-3881 19 3. At all relevant times, Mason was Blue Ocean’s owner.

20 4. At all relevant times, Mason acted on Blue Ocean’s behalf and controlled and 21 directed all actions of Blue Ocean. Mason caused Blue Ocean to take or fail to take each 22 action or failure to act of Blue Ocean identified in this Order to Cease and Desist, Proposed 23 Orders Denying Use of Exemptions, Assessing Civil Penalties, and Ordering Restitution, 24 and Notice of Right to an Administrative Hearing. 25 /// 26

Blue Ocean filed Articles of Dissolution on or around January 16, 2025, after the events set forth in this Order. 2 Page 2 of 8 – DEFAULT ORDER MASON, et al. – S-26-0012

1 5. In or around 2021, Mason approached California resident “IN” and solicited 2 him to invest in a project involving the construction and sale of modular homes. Mason 3 encouraged IN to invest through his “close friend and associate” Danny Hall (“Hall”). 4 Mason represented that Blue Ocean, Hall, and Hall’s company, Proper Foundations, LLC 5 (“PFL”), would also be investing in the project. 6 6. On or around June 30, 2021, IN entered into a “Memorandum of 7 Understanding” (“Memo”) with PFL to raise funds for the project. Under the terms of the 8 Memo: 9 A. IN would invest $50,000 with PFL for “monetization” of a Standby 10 Letter of Credit (“SLOC”); 3 11 B. The monetization would take approximately 10-15 days, after which 12 time PFL and Hall would pay IN $100,000; 13 C. After approximately seven weeks, PFL and Hall would pay IN an 14 additional $750,000; and 15 D. The remaining proceeds would be split between PFL and Blue Ocean 16 for “ongoing project expenses”.

17 7. The Memo stated “In the unlikely event that the monetization does not take

18 place, the funds will be returned to IN[.]” -4387

-3881 19 8. Respondents agreed to serve as the intermediary recipient of IN’s investment

20 funds. 21 9. On or around July 9, 2021, IN wired $50,000 to Blue Ocean’s Wells Fargo 22 checking account ending in -6476 (“Blue Ocean Account”). Mason owned and operated 23 the Blue Ocean Account, which was opened in Hillsboro, Oregon. 24 /// 25

An SLOC is a legal document that guarantees a bank's commitment of payment to a seller in the event that 3 the buyer—or the bank's client—defaults on the agreement. A standby letter of credit helps facilitate 26 international trade between companies that don't know each other and have different laws and regulations. Page 3 of 8 – DEFAULT ORDER MASON, et al. – S-26-0012

1 10. That same day, Mason wired $45,000 to PFL, leaving the remaining $5,000 in 2 the Blue Ocean Account. 3 11. Between in or around July 15, 2021 and August 20, 2021, Hall transferred 4 $19,500 to Mason’s Bank of America account ending in -5285. 5 12. At no time did IN receive any compensation from Respondents, PFL, and/or 6 Hall, pursuant to the Memo or otherwise. 4 7 13. Upon information and belief, none of IN’s investment funds were used for the 8 purposes identified in the Memo. 9 14. On or around May 20, 2025, the Division interviewed Mason regarding this 10 matter. During the interview, Hall: 11 A. Claimed the only compensation he received for brokering IN’s 12 investment was reimbursement of $50 in fees associated with the wire transfer; and 13 B. Admitted that, following IN’s investment, he conferred with individuals 14 in the financial industry to better understand SLOC transactions and learned they 15 are frequently utilized in fraudulent investment schemes. 5 16 15. On or around July 8, 2025, the Division conducted a follow-up interview with

17 Mason. During the interview, Mason admitted that the $5,000 he maintained in the Blue

18 Ocean Account represented compensation he received for brokering IN’s investment. -4387

-3881 19 16. At no time did Respondents, PFL, and/or Hall provide IN with detailed

20 disclosures of the risks specific to his investment with PFL and Hall. 21 17. IN had no control over the use of his investment funds. 22 18. IN did not play an active role in the management and/or control of his 23 investment. He relied on PFL and Hall’s efforts to realize a return on his investment. 24 /// 25

On or around July 10, 2023, IN filed a complaint against Respondents with the SEC. 4 The federal Treasury Department has also found that SLOC investments are frequently used for fraudulent 26 5 schemes. See https://treasurydirect.gov/laws-and-regulations/fraud/prime-bank-fraud/. Page 4 of 8 – DEFAULT ORDER MASON, et al. – S-26-0012

1 19. At no time did Respondents, PFL, and/or Hall register IN’s investment with the 2 Director pursuant to ORS 59.055. 3 20. At no time have Respondents, PFL, and/or Hall held an Oregon broker-dealer 4 or securities salesperson license, or otherwise been licensed with the Director to offer 5 and/or sell securities in Oregon pursuant to ORS 59.165. 6 CONCLUSIONS OF LAW 7 The Director CONCLUDES that: 8 21. The investment Respondents, PFL, and Hall offered and sold to IN, as 9 documented by the Memo, is a “security” under ORS 59.015(19)(a), as it is either an 10 “investment contract” or “evidence of indebtedness.” It is an investment contract because 11 IN invested money in a common enterprise with the expectation of profit to be made by 12 the management and control of others. 13 22. By offering and selling the foregoing investment to IN, Respondents, PFL, and 14 Hall “sold” securities, under ORS 59.015(17)(a) and (b), and transacted business as 15 “securities salespersons” under ORS 59.015(18)(a). 16 23. By offering and selling securities to IN without being licensed under the Oregon

17 Securities Law, Respondents, PFL, and Hall violated ORS 59.165(1).

18 24. By offering and selling unregistered securities to IN, Respondents, PFL, and -4387

-3881 19 Hall violated ORS 59.055.

20 25. Respondents, PFL, and Hall each failed to provide IN with detailed disclosures 21 of the risks specific to his investment, a material omission in violation of ORS 59.135(2). 22 26. Respondents, PFL, and Hall each engaged in an act, practice, or course of 23 business which operated as a fraud or deceit upon IN, in violation of ORS 59.135(3), by: 24 A. Offering and selling a security which: 25 (a) Involved a financial product, SLOC, Mason did not understand 26 and which is frequently utilized for fraudulent schemes; Page 5 of 8 – DEFAULT ORDER MASON, et al. – S-26-0012

1 (b) Offered implausibly large returns within an implausibly short 2 timeframe; and 3 (c) Misleadingly stated it was “unlikely” IN would not receive the 4 identified compensation, and falsely stated he would have his funds 5 returned should the investment fail; and 6 B. Maintaining IN’s investment funds for their personal enrichment rather 7 than their intended purpose, as set forth in Paragraphs (10), (12), and (14). 8 27. By engaging in the conduct set forth in Paragraphs (5) and (10-12), Respondents 9 participated and materially in PFL and Hall’s sale of a security to IN, and are liable for 10 violations resulting from that sale, under ORS 59.115(3). 11 28. By engaging in the conduct set forth in Paragraph (27), Respondents aided and 12 abetted PFL and Hall’s sale of a security to IN, and the corresponding fraud, under ORS 13 59.995(1). 14 29. By falsely stating he’d only received $50 for his role in selling a security to IN, 15 Mason violated ORS 59.135(4) and ORS 59.451. 16 30. Because the Director has reason to believe that Respondents have engaged, are

17 engaging, or are about to engage in violations of the Oregon Securities Law, the Director

18 may issue an order to Respondents to cease and desist from violations of the Oregon -4387

-3881 19 Securities Law under ORS 59.245(4).

20 31. Because the Director has reason to believe that Respondents have engaged or 21 are about to engage in violations of the Oregon Securities Law, or that the use of any 22 exemption by Respondents would work a fraud or imposition on purchasers, the Director 23 may deny Respondents the use of exemptions to the securities registration requirements 24 under ORS 59.045(2). 25 32. The Director may impose a civil penalty of up to $20,000 per violation upon 26 any person who violates, or who procures, aids or abets the violation of, the Oregon Page 6 of 8 – DEFAULT ORDER MASON, et al. – S-26-0012

1 Securities Law, under ORS 59.995(1). 2 33. The Director may order a person whose acts, omissions, practices, operations 3 or violation of ORS 59.005 to 59.505 and 59.710 to 59.830 or a rule or order of the director 4 causes harm to another person to pay restitution to the other person, under ORS 59.995(4). 5 ORDERS 6 Now therefore, the Director issues the following ORDERS as against Blue Ocean 7 only: 8 34. As authorized by ORS 59.245(4), the Director hereby ORDERS Blue Ocean to 9 CEASE AND DESIST from violating ORS 59.055, ORS 59.135(2), and (3), and (4), ORS 10 59.165(1), and ORS 59.451. 11 35. As authorized by ORS 59.045(2), the Director hereby DENIES Blue Ocean, 12 and any successor business entity or any business entity owned, operated, or controlled by 13 Blue Ocean, the use of exemptions that would otherwise be available to Blue Ocean under 14 ORS 59.025 and ORS 59.035, concerning securities and transactions exempt from the 15 registration requirements of the Oregon Securities Law. 16 36. As authorized by ORS 59.995(1), the Director hereby ORDERS that Blue

17 Ocean pay a CIVIL PENALTY totaling $80,000 as follows:

18 A. $20,000 for violating ORS 59.055. -4387

-3881 19 B. $20,000 for violating ORS 59.135(2) and (3);

20 C. $20,000 for violating ORS 59.165(1); and 21 D. $20,000 for violating ORS 59.123(4) and ORS 59.451. 22 37. As authorized by ORS 59.995(4), the Director hereby ORDERS that Blue 23 Ocean pay RESTITUTION of $50,000 to IN. 24 / / / 25 / / / 26 / / / Page 7 of 8 – DEFAULT ORDER MASON, et al. – S-26-0012

1 38. This is a “Final Order” under ORS 183.310(6)(b). Subject to this provision, the 2 entry of this Order does not limit further remedies that may be available to the Director 3 under Oregon law. 4 5 SO ORDERED this 31 day of March, 2026. st 6 SEAN E. O’DAY, Director 7 Department of Consumer and Business Services 8 9 /s/ Dorothy Bean Dorothy Bean, Chief of Enforcement 10 11 12 13 14 15 NOTICE OF RIGHT TO JUDICIAL APPEAL 16 You are entitled to judicial review of this order in accordance with ORS 183.482.

17 You may request judicial review by filing a petition with the Court of Appeals in Salem,

18 Oregon, within 60 days from the date this order is served. Note that under ORS 59.295(2), -4387

-3881 19 in the absence of a timely demand for a hearing, no person shall be entitled to judicial

20 review of the order. 21 22 23 24 25 26 Page 8 of 8 – DEFAULT ORDER MASON, et al. – S-26-0012