Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that JASON GALANIS was sentenced today by the Honorable Ronnie Abrams to 173 months for defrauding a Native American tribal entity and numerous pension fund investors of tens of millions of dollars in connection with the issuance of bonds by the tribal entity.
Acting U.S. Attorney Joon H. Kim said: “In a brazen securities scheme designed to enrich themselves at the expense of everyone else, Jason Galanis and his co-conspirators cheated both their tribal clients as well as the investing public. After defrauding a Native American tribe into issuing bonds, Jason Galanis and his cohorts sold the illiquid bonds to unwitting pension funds, and then stole the proceeds for themselves. For his role in this campaign of theft and deception, Jason Galanis will now spend over 14 years in federal prison.”
According to the allegations contained in the Indictment filed against JASON GALANIS and his co-conspirators and statements made in related court filings and proceedings[1]:
From March 2014 through April 2016, JASON GALANIS and others engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity (the “Tribal Bonds”), and to use funds in the accounts of clients of asset management firms controlled by JASON GALANIS and others to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market.
Documents governing the Tribal Bonds specified that an investment manager would invest the proceeds of the Tribal Bonds in investments that would generate annuity payments sufficient to pay interest on the Tribal Bonds and provide funds to the WLCC to be used for tribal economic development purposes. In fact, none of the proceeds of the Tribal Bonds were turned over to the investment manager specified in the closing documents. Instead, significant portions of the proceeds were misappropriated by JASON GALANIS and his co-defendants for their own personal use.
Specifically, the proceeds of the Tribal Bonds were deposited into a bank account in the name of Wealth Assurance Private Client Corporation (“WAPCC”). More than $38 million from the WAPCC account to an account controlled by JASON GALANIS, who then misappropriated more than $8.5 million of the proceeds for his personal use, including for expenses associated with his home, jewelry and clothing purchases, travel and entertainment, and restaurant meals.
There was no ready secondary market for the Tribal Bonds. Nonetheless, without prior notice, JASON GALANIS directed others to use funds belonging to clients of two related investment advisers, Hughes Capital Management, Inc. (“Hughes”) and Atlantic Asset Management, LLC (“Atlantic”) to purchase the Tribal Bonds, even though JASON GALANIS and others were well aware that material facts about the Tribal Bonds had been withheld from clients in whose accounts they were placed, including the fact that the Tribal Bond purchases fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients and of the Atlantic pooled investment vehicle in which the Tribal Bonds were purchased. When Hughes and Atlantic clients learned about the purchase of the Tribal Bonds in their accounts, several of them demanded that the Tribal Bonds be sold. However, because there was no ready secondary market for the Tribal Bonds, no Tribal Bonds have been sold from any Hughes or Atlantic client accounts. In addition, JASON GALANIS and his co-conspirators failed to apprise clients of Hughes and Atlantic regarding substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf.
In addition, a portion of the misappropriated proceeds was recycled and provided by JASON GALANIS to entities affiliated with co-conspirators in order to enable the purchase of subsequent Tribal Bonds issued by the WLCC. As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase.
In addition to the prison term, JASON GALANIS, 47, was sentenced to three years of supervised release. GALANIS was also ordered to forfeit $43,277,436 and to make restitution in the amount of $43,785,176.
Trial with respect to the remaining defendants is scheduled to begin on February 5, 2018, before the Honorable Ronnie Abrams.
This conviction represents JASON GALANIS’s second conviction in this District in the past year. On February 15, 2017, GALANIS was sentenced by the Honorable P. Kevin Castel to 135 months in prison in connection with his participation in a scheme to manipulate the market for Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange, and to defraud the shareholders of that company.
Mr. Kim praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.
[1] As for the defendants who have not pled guilty, the description of the charges set forth herein constitute only allegations.
