Feb 15 (Reuters) - A former Los Angeles investment banker was sentenced to more than 11 years in prison by a federal judge on Wednesday for his role in a stock manipulation scheme, resolving one of two criminal cases facing the man once dubbed “Porn’s New King.”
Jason Galanis, 46, admitted last year to securities fraud, investment adviser fraud and two conspiracy charges in connection with the scheme to manipulate shares in the now defunct reinsurer, Gerova Financial Group Ltd.
Galanis did not have a publicly disclosed role at Gerova but was head of a subsidiary and exerted control over the company through associates, prosecutors said. They said Galanis worked with the reinsurer’s former chairman to amass nearly half of the company’s public float and had them issued to a so-called straw holder to disguise Galanis’ ownership.
Galanis then allegedly bribed investment advisers to buy Gerova shares for their own clients, and through coordinated trading sold Gerova shares from the straw holder’s account in a scheme that generated nearly $20 million in profits, prosecutors said.
U.S. District Judge Kevin Castel in Manhattan sentenced Galanis to 11 years and three months in prison and ordered him to forfeit nearly $38 million, a mansion in Bel Air, California, and a $7 million apartment in New York.
The sentence was at the bottom of the range of up to 14 years sought by prosecutors.
The case is one of two against Galanis, who was nicknamed “Porn’s New King” by Forbes magazine in 2004 after buying the nation’s largest processor of credit card payments for internet pornography. Galanis also pleaded guilty in the second case, in which prosecutors say he and associates misappropriated the proceeds of a bond issue by a Native American tribe.
Galanis is due to be sentenced in May for that case, also in Manhattan federal court.
Galanis apologized and told the judge he understood the damage he had done.
“My moral compass is not broken,” Galanis said. “In certain cases I just ignored it.”
Judge Castel said he took into account that Galanis faces an additional sentence in the second case. He said Galanis stood apart from other defendants suffering from issues like drug addiction or mental illness in that he faced few impediments to doing well in life.
“Jason Galanis used his very considerable intellect and talents as a weapon,” the judge said. “In other words, he didn’t have to do it.” (reporting by Nathan Layne in New York; Editing by Noeleen Walder and Lisa Shumaker)