Stock Manipulation – A Family Affair
Sometimes it is all in the family. In this case it certainly appears to be all in the family – or at least largely. Jason, John, Jared and Derek Galanis teamed with Gary Hirst, Ymer Shahini and Gavin Hamels to manipulated the stock of Gerova Financial Group, Ltd. Derek is the latest defendant to strike a plea agreement and plead guilty. Galanis. U.S. v. Galanis, No. 1:15-cr-00643 (S.D.N.Y.).
The case centers on a microcap fraud and the manipulation of shares of New York Stock Exchange Listed Gerova Financial Group. Jason directed the scheme, according to court papers. He obtained control over the shares of Gerova, including the ability to cause the company to issue shares. In obtaining control Jason was able to conceal his actions, necessitated by the fact that he had been barred from the securities business by the SEC. He caused the company to issue about 5 million shares – nearly half of the public float – to Ymer Shahini. It was to be held for Jason’s benefit. Mr. Shahin, a long standing friend of Jason, was recruited to serve as a foreign nominee to hold the stock.
A series of accounts were opened by John and Jared with the knowledge of Derek. The accounts were in the name of Mr. Shahini. Those accounts were then used to engage in manipulative trading and hold the proceeds from the transactions. Overall about $20 million in shares were sold from the Shahini accounts. The value of the remaining shares held by the public is now $0.
Derek Galanis pleaded guilty to conspiracy to commit securities fraud and securities fraud. Previously, Jason Galanis pleaded guilty to two counts of conspiracy to commit securities fraud. John Galanis pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. Gavin Hamels pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud.
Defendants Gary Hirst and Jared Galanis are scheduled to being trial on September 12, 2016.