The U.S. Securities and Exchange Commission is charging John Galanis, his son Jason Galanis, and five other people with fraud involving a multimillion-dollar tribal bonds scam. The SEC claims that Jason ran the scheme to obtain a “source of discretionary liquidity.”
He and his father allegedly persuaded a Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation to put out limited recourse bonds that the two of them had structured. Jason then acquired two investment advisory firms and appointed officers to coordinate the purchase of $32 million in bonds. He used client money to purchase the bonds.
Investors were told that the bond proceeds would be invested in annuities to make enough money to pay back bondholders and to benefit the tribal corporation. Instead, the money went to a bank account owned by a company that Jason and his associates controlled. The funds were allegedly misappropriated to make luxury purchases and to pay lawyers representing Jason and his dad in a criminal case involving unrelated stock fraud charges.
The SEC wants disgorgement, interest, penalties, and permanent injunctions. Also named in the complaint are Devon Archer, Bevan Cooney, Hugh Dukerley, Gary Hirst, and Michelle Morton. They face charges of violating federal securities laws’ antifraud provisions and other rules.
In New York, the Galanis’ and these five associates face parallel criminal charges.
It was just last September that U.S. Attorney Preet Bharara accused John Galanis, his sons Jason Galanis, Jared Galanis, and Derek Galanis, as well as Gavin Hamels, Gary Hurst, and Ymer Shahini of a multimillion-dollar investment scam that bilked investors while they made nearly $20M in profits. The alleged market manipulation involved defrauding shareholders of Gerova Financial Group Ltd. and the investing public.
The men purportedly got control of millions of shares of Gerova stock in secret and rigged the market for the stock, which they allegedly caused to be sold in an alleged pump-and-dump scam. They generated demand for the stock by bribing investment advisers so that they would buy the stock for client accounts. The defendants then allegedly cashed out to make their illegal profits.
As part of the scam, said the SEC, which also filed civil charge over this matter, Jason Galanis and Hirst arranged for the secret issuance of $72M of unrestricted Gerova shares to someone in Kosovo. Jason, his dad, and his siblings then allegedly directed the share sales from that friend’s brokerage accounts and millions of dollars in proceeds were sent to them and their associates.
The SEC also charged Jason Galanis in 2005 for accounting fraud in a civil case involving Penthouse International Inc. and former Penthouse officer Charles Samel. Galanis was a Penthouse shareholder. His father, John has also been subject to other SEC enforcement actions going as far back as the early 1970’s.
Unfortunately, there are fraudsters who manage to perpetuate numerous scams. When this happens, even more investors suffer. At Shepherd Smith Edwards and Kantas, LTD LLP, our securities fraud law firm works with investors to recover their losses.
Contact our securities lawyers today.
Read the SEC Complaint in the tribal fraud case (PDF)
Read the SEC Complaint in the Gerova case (PDF)
Manhattan U.S. Attorney Announces Charges Against Seven Individuals For Multimillion-Dollar Investment Scheme, Justice.gov, September 24, 2015