Sometimes, in fact, most times the consequence of unethical illegal activity comes far too late. The company in question – Gerova Financial. It’s backers included Jason Galanis, 45, and his father John, 72. This is fraud pure and simple with an outcome that will never make those fleeced whole.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Jason Galanis and his co-conspirators used their Wall Street credentials and the veneer of a legitimate-sounding financial firm to manipulate the market and fleece investors. Their alleged market manipulation brought them nearly $20 million in profits, but now also a federal indictment.”
According to the Indictment, the defendants engaged in the following fraudulent schemes:
The Gerova Scheme
From 2009 to 2011, JASON GALANIS, JOHN GALANIS, JARED GALANIS, HIRST, DEREK GALANIS, SHAHINI, and HAMELS engaged in a scheme to defraud the shareholders of a publicly traded company called Gerova Financial Group, Ltd. (“Gerova”), and the investing public, by obtaining secret control over millions of shares of Gerova stock and then manipulating the market for the stock as the defendants caused their secretly held shares to be sold.As part of the scheme, the defendants fraudulently generated demand for Gerova stock by bribing investment advisers to purchase for client accounts the Gerova stock that was sold by the defendants, thereby enabling the defendants to cash out from the scheme and make millions in illegal profits.
As a part of the scheme to defraud, JASON GALANIS obtained such control over Gerova so as to be able to cause Gerova to enter into transactions of his design, and for his benefit, including the issuance of Gerova stock.JASON GALANIS obtained this control without identifying himself as an officer or director of Gerova to avoid the SEC-imposed bar that prohibited him from holding such positions at publicly traded companies.Among other means and methods, JASON GALANIS, with the assistance of GARY HIRST, caused more than five million shares of Gerova stock, which represented nearly half the company’s public float and which was intended for JASON GALANIS’s ultimate benefit, to be issued to and held in the name of YMER SHAHINI, who knowingly served as a foreign nominee for JASON GALANIS.JASON GALANIS, JOHN GALANIS, JARED GALANIS, DEREK GALANIS, HIRST, and SHAHINI understood that the purpose of the stock grant to SHAHINI was to disguise JASON GALANIS’s ownership interest in the stock, and to evade the SEC’s regulations for issuing unregistered shares of stock.
At the same time, and as a further part of the scheme to defraud, JOHN GALANIS, JARED GALANIS, and DEREK GALANIS, among others, with the knowledge and approval of JASON GALANIS, opened and managed brokerage accounts in the name of SHAHINI (the “SHAHINI Accounts”), effected the sale of Gerova stock from the SHAHINI Accounts, and received and concealed the proceeds, knowing that this activity was designed to conceal from the investing public JASON GALANIS’s ownership of and control over the Gerova stock.
JASON GALANIS and JARED GALANIS also fraudulently induced investment advisers, including GAVIN HAMELS and others, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser.By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, JASON GALANIS and JARED GALANIS were able to, among other things, effectuate the sale of large quantities of Gerova stock from the SHAHINI Accounts that JASON GALANIS controlled while artificially maintaining the price of Gerova stock through coordinated match trading.Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public.As a result, JASON GALANIS and his co-conspirators reaped nearly $20 million in profits.
The Scheme to Defraud Clients of Investment Firm-2
From November 2007 to April 2010, JASON GALANIS and JARED GALANIS, along with an investment adviser identified in the Indictment as “CC-2,” participated in a scheme to defraud the clients of CC-2’s investment advisory firm, identified in the Indictment as “Investment Firm-2.”Oftentimes in exchange for compensation from JASON GALANIS and JARED GALANIS, CC-2 caused Investment Firm-2 clients to invest in notes issued by entities associated with JASON GALANIS and JARED GALANIS.
When obligations owed by entities associated with JASON GALANIS and JARED GALANIS became due, CC-2, with the knowledge of JASON GALANIS and JARED GALANIS, used client funds to purchase either notes issued by other entities associated with JASON GALANIS and JARED GALANIS, or publicly traded shares held by such entities.The funds generated were then used to pay the original obligations owed to other Investment Firm-2 clients.Through these securities trades, funds in client accounts of one set of Investment Firm-2 investors were used to pay obligations owed to a different set of Investment Firm-2 investors by entities associated with JASON GALANIS and JARED GALANIS.
This is Fraud Pure and Simple:
The governments indictment can be read here: https://www.justice.gov/usao-sdny/file/777856/download
But there’s more! According to a recent article in the Wall Street Journal the following was shared:
Jason Galanis, a former investor in the adult-entertainment business, allegedly duped clients into investing more than $43 million in sham bonds issued in 2014 and 2015 by an affiliate of the Oglala Sioux Nation in South Dakota.
The younger Galanis was charged in Manhattan federal court in September for activities related to an alleged pump-and-dump scheme. He was accused by prosecutors of secretly taking control of reinsurance firm Gerova Financial Group Ltd. and then dumping its stock, reaping nearly $20 million in illegal profits. Mr. Galanis’ father is also charged in that case. They have pleaded not guilty in the Gerova case.
Guess…there are times that one can’t seem to make ethical choices. This seems to be one of them.
Guess we’ll see where this goes, but the cards are stacked against the alleged fraudsters!
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