Finance Magazine Owner Accused of Fraud

MANHATTAN (CN) - A venture capitalist who owns Equities Magazine defrauded investors while reaping nearly $20 million in profits by manipulating Gerova Financial Group stock, federal prosecutors say in an indictment unsealed on Thursday.

Prosecutors say Jason Galanis, 45, secretly took control of Gerova, even though the Securities and Exchange Commission had previously barred him from holding any positions at publically traded companies at the time.

Galanis incurred that five-year ban in 2007 to settle accounting-fraud and financial-reporting violations stemming the case SEC v. Penthouse International.

That case also carried a $60,000 penalty for Galanis, who had been a shareholder with the pornographic magazine.

The charges in today's indictment involve conduct that occurred between 2009 and 2011, well before the SEC's ban lapsed.

With the help of his father, two brothers, and a family friend from Kosovo, Galanis engineered a massive sell-off of the shares and then artificially stabilized the stock price by bribing two investment advisers to buy Gerova shares for their clients, according to the indictment.

Galanis was arrested this morning and faced presentment later in the day before a federal judge in Manhattan.

His brothers, Jared and Derek Galanis, were arrested in Baltimore, Md., and San Francisco, Calif., respectively.

Their father, John "Yanni" Galanis, and two other suspected members of the scheme remain at large.

The SEC slapped all of the men with civil charges filed separately on Thursday.

Manhattan U.S. Attorney Preet Bharara said in a statement Galanis and his alleged cohorts "used their Wall Street credentials and the veneer of a legitimate-sounding financial firm to manipulate the market and fleece investors."

An attorney for Jason Galanis did not immediately respond to a request for comment.

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