Derek Galanis Pleads Guilty In Manhattan Federal Court To Securities Fraud

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Monday, August 15, 2016

Derek Galanis Pleads Guilty In Manhattan Federal Court To Securities Fraud
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The Gerova Scheme

From 2009 to 2011, DEREK GALANIS, along with his co-conspirators Jason Galanis, John Galanis, Jared 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 so as 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, a longstanding friend of Shahini’s, recruited 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, Jason Galanis, John Galanis, Jared 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 and Jared Galanis, with DEREK GALANIS’s knowledge, opened and managed brokerage accounts in the name of Shahini (the “Shahini Accounts”), effected the sale of Gerova stock from the Shahini Accounts through manipulative trading, 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. In total, DEREK GALANIS and his co-conspirators sold nearly $20 million worth of Gerova shares from the Shahini Accounts for their own benefit.

In contrast, unsuspecting Gerova shareholders were left with a worthless investment. More specifically, in March 2011 the New York Stock Exchange (“NYSE”) halted trading of Gerova and in April 2011 Gerova asked the NYSE to delist its securities. By November 2, 2011, Gerova’s stock price had bottomed out at $0.00 per share.
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