U.S. charges seven defendants in Gerova pump-and-dump
24/09/2015 19:38
By Joseph Ax
NEW YORK, Sept 24 (Reuters) - U.S. authorities on Thursday
charged an investment banker, three relatives and three others
with engineering a "pump-and-dump" scheme in a reinsurance
company that allegedly netted nearly $20 million of illegal
profit.
Prosecutors said the investment banker Jason Galanis, 45, of
Los Angeles, secretly took control of millions of shares of
Gerova Financial Group Ltd GVFG.PK and induced investment
advisers to drive up its stock price by purchasing shares for
client accounts in exchange for benefits.
The scheme allegedly caused roughly half of Gerova's
publicly traded shares to be held in the name of Ymer Shahini, a
national of Canada and Kosovo who lived in the Czech Republic,
to hide Galanis' control, prosecutors said.
Galanis was accused of working with his father John, 72, and
brothers Derek and Jared, 43 and 36 respectively, to open
accounts in Shahini's name, with assistance from Gerova Chairman
Gary Hirst, 63, of Lake Mary, Florida.
Meanwhile, investment advisers including Gavin Hamels, 39,
of Encinitas, California, were allegedly induced to buy shares
for their clients in exchange for bribes, the indictment said.
The indictment cited an email to Derek Galanis in which
Shahini joked shortly after receiving some Gerova stock that he
was rich.
"If we do this just right, my friend, we may all be!"
Galanis was said to reply.
In 2004, Jason Galanis was nicknamed "Porn's New King" by
Forbes magazine after buying the nation's largest processor of
credit-card payments for Internet pornography.
He was arrested on Thursday and expected to appear in
Manhattan federal court.
Jared Galanis was also arrested on Thursday and expected to
appear in federal court in Maryland. Derek Galanis was expected
to surrender on Thursday in San Francisco, and Hamels on Monday
in New York, authorities said. John Galanis, Hirst and Shahini
are at large, authorities added.
Lawyers for the defendants declined to comment, did not
immediately respond to requests for comment or could not be
identified. All seven defendants face conspiracy and fraud
charges.
The U.S. Securities and Exchange Commission filed parallel
civil charges against all the defendants except Shahini.
Jason Galanis settled unrelated SEC charges in 2007, while
John Galanis has been a defendant in several SEC actions since
the 1970s, the regulator said.
Gerova shares now trade on the Pink Sheets. They last traded
on Sept. 1, at 1/100th of 1 cent.
The criminal case is U.S. v. Galanis et al, U.S. District
Court, Southern District of New York, No. 15-cr-00643.
(Reporting by Joseph Ax; Editing by Andrew Hay)
((joseph.ax@thomsonreuters.com; 1-646-223-6594 1-917-848-0813;
Reuters Messaging: joseph.ax.thomsonreuters.com@reuters.net))
Keywords: GEROVA CHARGES/