New York.- (GreekNewsOnline)
On in two separate cases handled by the United States Attorney for the Southern District of New York Preet Bharara, two Greek Americans (father and son) have received 6 year sentences for manipulating the market for Gerova Financial Group, Ltd; in a second case, Greek Americans George Doumanis and Emanuel Pantelakis were indicted for orchestrating a scheme to defraud investors of at least approximately $5 million.
The first case involves JOHN GALANIS and his son DEREK GALANIS who were each sentenced to six years in prison for manipulating the market for Gerova Financial Group, Ltd. (“Gerova”), a publicly traded company listed on the New York Stock Exchange, and defrauding the shareholders of that company. JOHN GALANIS and DEREK GALANIS each pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud, on July 20, 2016, and August 15, 2016, respectively. Both were sentenced by United States District Judge P. Kevin Castel.
In addition to the prison terms, JOHN GALANIS, 73, and DEREK GALANIS, 44, were each sentenced to three years of supervised release, and each ordered to forfeit $19,038,650.53. Judge Castel will set a restitution amount for each at a future proceeding.
U.S. Attorney Preet Bharara said: “John and Derek Galanis conspired to have more than $70 million worth of stock issued, hiding Jason Galanis’s control of those shares, so that they could cash out at the expense of unwitting victim investors. Today, they have been sentenced to prison for their securities fraud.”
According to the allegations contained in the Indictment filed against JOHN GALANIS, DEREK GALANIS, and their co-conspirators, and statements made in related court filings and proceedings:
From 2009 to 2011, JOHN GALANIS, DEREK GALANIS, and co-conspirators Jason Galanis, Gary Hirst, Ymer Shahini, and Gavin Hamels, engaged in a scheme to defraud the shareholders of 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 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 in order to appear 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. DEREK GALANIS recruited his longstanding friend Shahini to the scheme, telling Shahini in an email, “All we need is a foreign national we trust which is where you come in my friend.” DEREK GALANIS, JOHN GALANIS, Jason 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, JOHN GALANIS, with the assistance of DEREK GALANIS and the knowledge and approval of Jason Galanis, opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts, 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.
Jason Galanis, among others, also fraudulently induced investment advisers, including Gavin Hamels, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser. JOHN GALANIS and Jason Galanis thereafter coordinated the purchase of Gerova stock at the time, quantity, and/or price of their choosing, thus effectuating the sale of large quantities of Gerova stock from the Shahini Accounts while artificially maintaining the price of Gerova stock through match trading. Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public. In total, JOHN GALANIS, DEREK GALANIS, Jason Galanis, and their co-conspirators sold nearly $20 million worth of Gerova shares from the Shahini accounts for their own benefit.
Jason Galanis, who pled guilty to two counts of conspiracy to commit securities fraud, one count of securities fraud, and one count of investment adviser fraud, was sentenced to a term of 135 months in prison on February 15, 2017. Jared Galanis, who pled guilty to misprision of a felony, was sentenced to a term of 150 days in prison on January 11, 2017. Gary Hirst, who was found guilty after trial of conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud, is scheduled to be sentenced on March 17, 2017. Defendant Ymer Shahini remains a fugitive. The allegations contained in the Indictment as to Shahini are merely accusations, and he is presumed innocent unless and until proven guilty.
Mr. Bharara praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the SEC.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais, Aimee Hector, and Rebecca Mermelstein are in charge of the prosecution.
DOUMANIS – PANTELAKIS
Preet Bharara, the United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced on Friday the unsealing of an indictment charging GEORGE DOUMANIS, EMANUEL PANTELAKIS, a/k/a “Manny,” and DANNY PRATTE with orchestrating a scheme to defraud investors of at least approximately $5 million.
DOUMANIS and PANTELAKIS will be presented and arraigned later on Friday before United States Magistrate Judge Gabriel W. Gorenstein. PRATTE is expected to surrender to the FBI in Denver, Colorado. United States District Judge Andrew L. Carter Jr. will hold an initial conference in the case on March 6, 2017, at 1:00 pm.
Each of the defendants are charged with one count of conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison; and one count of securities fraud, one count of conspiracy to commit mail and wire fraud, and one count of wire fraud, each of which carries a maximum sentence of 20 years. The charges also carry a maximum fine of $5 million, or twice the gross gain or loss from the offense. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencings of the defendants would be determined by the judge.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, George Doumanis, Emanuel Pantelakis, and Danny Pratte deceived investors with a fraudulent plan to invest in fuel cell technology. In reality, all they were allegedly fueling was their own greed-inspired scheme to bilk investors and use the money to pay credit card bills, for a Mercedes Benz, and a horse trainer. Doumanis and Pantelakis allegedly committed their fraud scheme after being banned for life from the securities industry by the SEC and FINRA.”
FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “Doumanis, Pantelakis, and Pratte are charged with defrauding Terminus investors by selling them shares of a product that was, essentially, nonexistent. They allegedly did so while intentionally misrepresenting to investors the rate of commission individuals acting as broker-dealers would receive for Terminus stock sold. In the end, as alleged, nearly three quarters of the money obtained by investors was swindled for the collective benefit of those involved. Despite the fact that Doumanis and Pantelakis had been disciplined in the past for their role in other fraudulent securities-related activities, they allegedly participated in this scheme undeterred. Investors deserve to be told the truth, plain and simple, and we’re committed to uncovering it.”
According to the Indictment unsealed in Manhattan federal court:
In September 2003, DOUMANIS was convicted in the United States District Court for the Southern District of Florida of conspiring to commit securities fraud, wire fraud, and mail fraud. In addition, in or about June 2005, as a result of an action brought by the United States Securities and Exchange Commission (“SEC”), DOUMANIS was permanently barred from, among other things, participating in any offering of any penny stock and from any association with any securities broker or dealer.
In March 2008, PANTELAKIS was permanently barred by the Financial Industry Regulatory Authority (“FINRA”), a self-regulatory body for the securities industry, from association with any FINRA member in any capacity, following allegations that he “fraudulently misrepresented and omitted material facts to public customers in connection with the sale of securities.”
From at least in or about February 2008 through at least in or about 2014, DOUMANIS, PANTELAKIS, and PRATTE engaged in a fraudulent scheme to defraud investors by inducing them to purchase shares of Terminus Energy, Inc. (“Terminus”), through false and misleading representations and then misappropriating the victims’ funds for their own purposes. PRATTE was the Chief Executive Officer of Terminus, a company that was purportedly working to develop a “fuel cell,” a type of alternative energy source. As set forth in more detail below, contrary to representations made to potential investors, Terminus never had a working fuel cell prototype, was never close to manufacturing a commercially viable fuel cell, and never sold any fuel cells.
Between 2008 and 2011, Terminus entered into a number of contractual agreements with third parties, the stated purpose of which was to develop a fuel cell. In each and every case, however, Terminus made only one or two payments on these contracts before ceasing payments. As a result, the third parties ceased work pursuant to the contracts and terminated the agreements.
Notwithstanding the utter lack of progress and the cancellation of Terminus’s contractual relationships, DOUMANIS, PANTELAKIS, and PRATTE drafted and caused Terminus to distribute false and misleading press releases, private placement memorandums, business plans, and other documents that touted the existence of a fuel cell, the existence of Terminus’s contractual relationships, and the use of investor proceeds to make payments on the contracts.
In addition, DOUMANIS, PANTELAKIS, and PRATTE drafted and distributed private placement memorandums that falsely stated that registered broker-dealers would be paid no more than a 10 percent sales commission plus three percent unaccountable expenses for all Terminus shares sold through their efforts. In truth, unregistered salespeople sold Terminus shares in return for undisclosed commissions far in excess of 13 percent.
Rather than use investor funds as promised, DOUMANIS, PANTELAKIS, and PRATTE misappropriated the money for their own purposes. Of the more than approximately $5 million raised from investors: (a) PRATTE received at least $990,000; DOUMANIS, certain entities affiliated with DOUMANIS, and certain of his family members received at least $570,000, a portion of which was utilized for items such as making payments to various credit cards and payments toward DOUMANIS’s residential mortgage; (c) PANTELAKIS and certain of his family members received at least $420,000, a portion of which was utilized to make payments to various credit cards and for his wife’s Mercedes-Benz; (d) one unregistered salesperson (the “Salesperson”) received payments of at least $540,000, an entity associated with the Salesperson received at least $100,000, and a horse trainer working for the Salesperson received at least $132,000; and (e) other unregistered brokers selling Terminus shares collectively received payments of at least $1,019,624. Thus, in total more than 70% of the investor funds obtained by Terminus were misappropriated by DOUMANIS, PANTELAKIS, and PRATTE, the defendants, or used to pay commissions to unregistered salespeople.
DOUMANIS, 58, of Rocky Point, New York, was arrested in Suffolk County. PANTELAKIS, 42, of Flushing, New York, was arrested t in Queens.
Mr. Bharara praised the investigative work of the FBI, and thanked the SEC, which has filed civil charges in a separate action.
The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.