Career Securities Law Violator Pleads Guilty To Manipulation

The Manhattan U.S. Attorney’s Office secured a guilty plea in a stock manipulation case from a career securities law violator. The guilty plea is the fourth conviction for defendant John 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 publicly traded Gerova Financial Group. To execute his scheme Mr. Galanis, with the assistance of an investment adviser, caused the firm to issue 5 million shares. That represented nearly half of the public float for the company. It was then placed in an account under the name of Shahina. This disguised his ownership of the stock.

A series of accounts under the Shahina name were then opened. Mr. Galanis induced investment advisers and others to purchase shares of Gerova stock for their clients by paying bribes. These arrangements permitted him to control the timing of the market transactions. That activity was coordinated with wash sales and matched trades which manipulated the share price. As this market activity unfolded Mr. Galanis and his conspirators sold their stock. The manipulation yielded about $20 million in profits.

Mr. Galanis pleaded guilty to one count of conspiracy to commit securities fraud and one count of securities fraud. The date for sentencing has not been set. Mr. Galanis was previously convicted of securities fraud and bribery in 1973 and sentenced to serve 6 months in prison. In 1988 he was convicted of multiple counts of racketeering, tax fraud, securities fraud, bank fraud and bribery and sentenced to serve 27 years in prison. That same year he was convicted in New York County Supreme Court of grand larceny and sentenced to serve seven to seventeen years in prison.

Previously, in this case, Gavin Hamels pleaded guilty to one count of conspiracy to commit securities fraud. He is awaiting sentencing. Four other defendants are scheduled for trail in September 2016.