Singapore Resident Pleads Guilty In Manhattan Federal Court To Soliciting Millions Of Dollars In Pre-IPO Stock Scheme
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Ruth M. Mendonça, Acting Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (“USPIS”), and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced today the extradition of YMER SHAHINI in connection with alleged securities fraud offenses relating to a scheme to defraud shareholders of a publicly traded company and the investing public. SHAHINI was taken into custody by Kosovar authorities in Pristina, Kosovo, on June 11, 2019, and extradited to the United States pursuant to the extradition treaty between the United States and the Republic of Kosovo, which went into effect on June 13, 2019. SHAHINI arrived in the United States on Friday, August 23, 2019, was presented that same day before United States Magistrate Gabriel W. Gorenstein, and was ordered detained. An arraignment and initial conference are scheduled before United States District Judge P. Kevin Castel on September 10, 2019, at 11:00 a.m.
U.S. Attorney Geoffrey S. Berman said: “As alleged, Ymer Shahini played a vital role in a multimillion-dollar fraud, knowingly serving as a straw man to conceal beneficial ownership of stock. Now, with the invaluable assistance of the Kosovo Ministry of Justice and the Justice Department’s Office of International Affairs, Shahini is in the U.S. and facing justice in federal court in our District.”
Acting Postal Inspector-in-Charge Ruth M. Mendonça said: “Mr. Shahini’s extradition to the United States is a testament to the collaboration amongst the international law enforcement community. Mr. Shahini’s alleged participation in this investment fraud scheme was uncovered and now he faces the same fate of his co-conspirators.”
FBI Assistant Director William F. Sweeney Jr. said: “Ymer Shahini allegedly assisted others in a scheme to manipulate the stock of a publicly traded company, thereby defrauding shareholders and the public. Now, Shahini will finally face justice for his allegedly deliberate acts.”
According to the allegations contained in the Indictment:
From 2009 to 2011, YMER SHAHINI, along with co-defendants Jason Galanis, John Galanis, Derek Galanis, Gary Hirst, and Gavin Hamels, engaged in a scheme to defraud the shareholders of a publicly traded company called Gerova Financial Group, Ltd. (“Gerova”), and the investing public, by obtaining secret control over millions of shares of Gerova stock and then manipulating the market for the stock as the defendants caused their secretly held shares to be sold. As part of the scheme, the defendants fraudulently generated demand for Gerova stock by bribing investment advisers to purchase for client accounts the Gerova stock that was sold by the defendants, thereby enabling the defendants to cash out from the scheme and make millions in illegal profits.
As a part of the scheme to defraud, Jason Galanis obtained such 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 identifying himself as an officer or director of Gerova to avoid the SEC-imposed bar that prohibited him from holding such positions at publicly traded companies. Among other means and methods, Jason Galanis, with the assistance of Gary Hirst, caused more than five million shares of Gerova stock, which represented nearly half the company’s shares held by public investors, 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. SHAHINI, Jason Galanis, John Galanis, Derek Galanis, and Hirst 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 Derek Galanis, among others, with the knowledge and approval of YMER SHAHINI and 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 also fraudulently induced investment advisers, including Gavin Hamels and others, to purchase shares of Gerova stock in the investment advisers’ client accounts by offering compensation and/or other benefits to the respective investment adviser. By causing the purchase of Gerova stock at the time, quantity, and/or price of their choosing, Jason Galanis was able to, among other things, effectuate the sale of large quantities of Gerova stock from the SHAHINI Accounts that Jason Galanis controlled while artificially maintaining the price of Gerova stock through coordinated match trading. Such coordinated trading served to manipulate the market for Gerova stock and deceive the investing public. As a result, Jason Galanis and his co-conspirators reaped nearly $20 million in profits.
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The Indictment charges SHAHINI, 49, a citizen of Kosovo, in four counts: (1) conspiracy to commit securities fraud, which carries a maximum sentence of five years in prison, (2) securities fraud, which carries a maximum sentence of 20 years in prison, (3) conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison, and (4) wire fraud, which carries a maximum sentence of 20 years in prison. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.
The cases against YMER SHAHINI’s co-defendants have all been resolved, as follows:
Jason Galanis pled guilty to two counts of conspiracy to commit securities fraud, one count of securities fraud, and one count of investment adviser fraud, and received a term of imprisonment of 135 months.
John Galanis pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud, and received a term of imprisonment of 72 months.
Derek Galanis pled guilty to one count of conspiracy to commit securities fraud and one count of securities fraud, and received a term of imprisonment of 72 months.
Gary Hirst was found guilty by a jury after a 3-week trial of one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of wire fraud, and was sentenced to a term of imprisonment of 78 months.
Gavin Hamels pled guilty to one count of conspiracy to commit securities fraud, one count of securities fraud, and one count of investment adviser fraud, and received a sentence of time served.
Mr. Berman praised the work of the United States Postal Inspection Service and the Federal Bureau of Investigation, and thanked the U.S. Securities and Exchange Commission for its assistance. With respect to the extradition, Mr. Berman also thanked the Office of International Affairs of the Justice Department’s Criminal Division, the United States Marshals Service, and the Kosovo Ministry of Justice.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Brian Blais, Rebecca Mermelstein, and Elizabeth Espinosa are in charge of the prosecution.
The allegations contained in the Indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
 As the introductory phrase signifies, the entirety of the text of the Indictment and the description of the Indictment set forth below, with respect to Ymer Shahini, constitute only allegations, and every fact described should be treated as an allegation.