Former Los Angeles investment banker pleads guilty to fraud
19/01/2017 23:39
By Nate Raymond
NEW YORK, Jan 19 (Reuters) - A former Los Angeles investment
banker once dubbed "Porn's New King" pleaded guilty on Thursday
for the second time in a year to engaging in securities fraud,
admitting to participating in a scheme that cheated investors
and a Native American tribe.
Jason Galanis, 46, entered his plea in Manhattan federal
court to charges that included securities fraud and conspiracy
to commit investment adviser fraud in connection with what
prosecutors called a multimillion-dollar scheme.
Under a plea deal, Galanis, who is scheduled to be sentenced
on May 5, agreed to forfeit over $43 million and not appeal any
prison term of about 19-1/2 years or less.
His sentence would be on top of whatever he receives as
punishment in a separate case, in which Galanis admitted in July
to manipulating the market for reinsurer Gerova Financial Group
Ltd GVFG.PK . urn:newsml:reuters.com:*:nL1N1A717C
In that case, he agreed not to appeal a prison term of
12-1/2 years or less and is scheduled to be sentenced on Feb.
16.
Galanis was dubbed "Porn's New King" by Forbes magazine in
2004 after buying the nation's largest processor of credit card
payments for internet pornography.
Three years later, the SEC fined him $60,000 after alleging
he prepared false accounting information for Penthouse
International Inc, in which he held a large stake.
According to prosecutors, beginning in 2014, Galanis and his
father, John, persuaded the Wakpamni Lake Community Corp, an
affiliate of the Oglala Sioux Nation in South Dakota, to issue
$60 million in municipal bonds.
Together with his father and five associates, Galanis and
his co-defendants then misappropriated the bond proceeds,
prosecutors said. They said he obtained $8.5 million for
himself, which he spent on items such as his home, jewelry and
travel.
To buy the illiquid bonds, Galanis arranged for two
co-defendants to use about $40 million belonging to clients of
investment advisers Hughes Capital Management Inc and Atlantic
Asset Management LLC, prosecutors said.
Prosecutors said that as a result of the fraud, those
investors were left with worthless securities, while the tribal
corporation was left with no way to make interest payments due
on the bonds.
The case is U.S. v. Galanis et al, U.S. District Court,
Southern District of New York, No. 16-cr-00371.
(Reporting by Nate Raymond in New York; Editing by Peter
Cooney)
((Nate.Raymond@thomsonreuters.com and Twitter @nateraymond;
646-223-6752; Reuters Messaging:
nate.raymond.thomsonreuters.com@reuters.net))
Keywords: USA CRIME/TRIBALBOND