Investing

SEC Charges Father and Son, Among Others, in Tribal Bonds Fraud

Chris Lange

Published: May 12, 2016 11:55 am

Last Updated: January 13, 2020 8:08 am

The U.S. Securities and Exchange Commission (SEC) charged a father and son and five associates with defrauding investors via sham Native American tribal bonds in an effort to steal millions of dollars in proceeds for their own extravagant expenses and criminal defense costs.

In the report, the agency alleged that Jason Galanis, whose checkered past dates from an accounting fraud case during his days as a major Penthouse shareholder to stock fraud charges last year, conducted the scheme in which the “primary objective is to get us a source of discretionary liquidity,” he wrote in an e-mail to other participants.

Galanis and his father, John Galanis, convinced a Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation to issue limited recourse bonds that the father-and-son duo had already structured. Galanis then acquired two investment advisory firms and installed officers to arrange the purchase of $43 million in bonds using clients’ funds.

The SEC further alleged that instead of investing bond proceeds as promised in annuities to benefit the tribal corporation and generate sufficient income to repay bondholders, the money wound up in a bank account in Florida belonging to a company controlled by Jason Galanis and his associates. Among their alleged misuses of the misappropriated funds were luxury purchases at such retailers as Valentino, Yves Saint Laurent, Barneys, Prada and Gucci. At the same time, investor money also was diverted to pay attorneys representing Jason and John Galanis in a criminal case brought parallel to the SEC’s stock fraud charges last year.

Andrew M. Calamari, regional director of the SEC’s New York office, commented:

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. Galanis persisted in this alleged scheme even after he was arrested by criminal authorities and charged by the SEC in a different case.

In addition to Jason and John Galanis, the complaint names Devon Archer, Bevan Cooney, Hugh Dunkerley, Gary Hirst and Michelle Morton. They’re charged with violations of the antifraud provisions of the federal securities laws and related rules.

In a parallel action, the U.S. Attorney’s announced criminal charges against the same seven individuals. The SEC is seeking disgorgement plus interest and penalties as well as permanent injunctions. The SEC also seeks officer-and-director bars against Jason Galanis, Archer, Dunkerley and Morton.