A California man and his father already accused of stock fraud in a “pump-and-dump” scheme are facing new charges alleging they swindled investors in Native American bonds out of more than $43 million.
According to the U.S. Securities and Exchange Commission, Jason Galanis, 45, and his father John Galanis, 73, used some of the proceeds from the sale of limited recourse bonds issued by an affiliate of the Oglala Sioux Nation in South Dakota to pay attorneys representing them in the stock fraud case.
From August 2014 to April 2015, the Galanises arranged for the Wakpamni Lake Community Corp. to issue three tranches of tribal bonds, the SEC said. They allegedly told investors the money would be used to invest in annuities to benefit the tribe and generate income to repay bondholders.
“We allege that Jason Galanis and his associates embarked upon a brazen and complex scheme in cold and calculated fashion to steal millions of dollars from unwitting investors,” Andrew M. Calamari, regional director of the SEC’s New York office, said in a news release.
“Galanis persisted in this alleged scheme even after he was arrested by criminal authorities and charged by the SEC in a different case.”
Manhattan U.S. Attorney Preet Bharara alleged the defendants had also victimized tribal members. “Instead of investing the proceeds in a way that would provide capital for development and help cover the interest payments, the defendants allegedly pocketed most of it to pay for their own personal expenses, homes, cars, travel, and jewelry,” he said.
The funds were allegedly misused to make luxury purchases at such retailers as Valentino, Yves Saint Laurent, Barneys, Prada, and Gucci.
Jason Galanis was dubbed “Porn’s New King” after he bought the largest U.S. processor of credit card payments for internet pornography. In 2007, the SEC fined him $60,000 for preparing false accounting information for Penthouse International, in which he was a large shareholder.
In the stock fraud case, he is accused of orchestrating a pump-and-dump swindle that cost investors in the reinsurer Gerova Financial Group nearly $20 million.