A Family Affair: Jason, John, Derek And Jared
The California Bar Journal reports
Jared Morgan Galanis [#238549], 39, of Baltimore, Maryland, was suspended effective June 9, 2018, for two years or until he provides proof to the State Bar Court of his rehabilitation, fitness to practice, and present learning ability in the general law. He was also ordered to take and pass the Multistate Professional Responsibility Examination during his suspension, and ordered to notify clients of the discipline and perform other obligations under rule 9.20 of the California Rules of Court. Galanis pleaded guilty to one count of misprision of a felony in connection with a securities fraud scheme conducted by his father and brothers, which they conducted using his law firm’s email and trust account without his knowledge. Galanis only became aware of the scheme when he was responding to a subpoena from the Security and Exchange Commission (SEC) and discovered what his father had done. Galanis’ crime was in not informing the SEC that his father had been impersonating him when he turned over the emails and other records. Galanis had no record of prior disciplinary matters.
From the United States Attorney’s Office for the Southern District of New York is this report
From 2009 to 2011, Jason Galanis, John Galanis, Derek Galanis, Gary Hirst, Ymer Shahini, and Gavin 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 effecting securities transactions in Gerova stock for the purpose of conferring millions of dollars of undisclosed remuneration on the co-conspirators, without adequate disclosure of Jason Galanis’s role in directing the transactions or the benefits received by Jason Galanis and his co-conspirators.
As a part of the scheme to defraud, Jason Galanis obtained sufficient 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 causing himself to be identified as an officer or director of Gerova so as to purport to abide by an SEC-imposed bar that forbade him from holding such positions at publicly traded companies. Among other means and methods, Jason Galanis, with the assistance of Hirst, caused over five million shares of Gerova stock, which represented nearly half the company’s public float and which were 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, 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, various co-conspirators opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts through manipulative trading, 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. In total, the co-conspirators sold nearly $20 million worth of Gerova shares from the Shahini Accounts for their own benefit.
In contrast, unsuspecting Gerova shareholders were left with a worthless investment. More specifically, in March 2011, the New York Stock Exchange (“NYSE”) halted trading of Gerova and in April 2011, Gerova asked the NYSE to delist its securities. By November 2, 2011, Gerova’s stock price had bottomed out at $0.00 per share.
JARED GALANIS, an attorney, was aware of the criminal scheme involving Gerova and took steps to conceal it. In particular, JARED GALANIS permitted John Galanis to use a phone and a law firm email account registered to JARED GALANIS in furtherance of the scheme and transferred the proceeds of the fraudulent scheme through his attorney trust account.
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JARED GALANIS, 37, pled guilty to one count of misprision of a felony, which carries a maximum sentence of three years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.
Derek Galanis, 44, pled guilty on August 15, 2016, to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense.
Jason Galanis, 46, pled guilty on July 21, 2016, to two counts of conspiracy to commit securities fraud, each carrying a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense; and one count of investment adviser fraud, which carries a maximum sentence of five years in prison and a maximum fine of $10,000 or twice the gross gain or loss from the offense.
John Galanis, 73, pled guilty on July 20, 2016, to one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense; and one count of securities fraud, which carries a maximum sentence of 20 years in prison and a maximum fine of $5,000,000 or twice the gross gain or loss from the offense.
I doubt there will be happy father’s days going forward. (Mike Frisch)