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Regulation and Compliance > Federal Regulation > SEC

SEC Busts $43M Tribal Bonds Scheme

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The Securities and Exchange Commission charged a Los Angeles man Wednesday for his role in a fraudulent scheme to gain undisclosed control over two registered investment advisors so that he, his partner, and their associates could steal $43 million of client funds they purported to invest in Native American tribal bonds.

The SEC alleges that Jason Sugarman, formerly associated with a registered broker-dealer and investment advisor, directed the scheme along with Jason Galanis, whom the SEC has previously charged with securities fraud and is now serving prison time.

Over a three-year period beginning in late 2013, the SEC’s complaint states that Sugarman and his business partner, Galanis, working with seven others, “stole $43 million from unwitting pension funds to finance the acquisition of a global financial conglomerate of European and Bermuda insurers, and investment advisors based in Virginia and Connecticut.”

Along the way, the complaint states, “through a series of fraudulent transactions made complex enough to cover their tracks, Sugarman, Galanis and their confederates also victimized a Native American tribal corporation and surreptitiously siphoned millions of dollars in cash from the entities that they acquired.”

Sugarman and Galanis were “in frequent contact with each other, sometimes exchanging multiple communications a day by email and phone, as well as through messaging services designed to conceal and destroy their communications, like Wickr, an end-to-end encrypted and content-expiring messaging application,” the complaint states.

Because of their close association, Galanis frequently referred to Sugarman in meetings and emails as “Sug” or “Sugie Bear,” according to the complaint. Other scheme participants referred to them as the “two Jasons.”

The commission previously charged Galanis and seven other individuals for their roles in the tribal bonds scheme. Galanis pleaded guilty to parallel criminal charges.

“These charges reflect that orchestrating a scheme from behind the scenes does not insulate someone from liability,” said Sanjay Wadhwa, senior associate director of the SEC’s New York office.  “As alleged in the complaint, Sugarman played a crucial role in obtaining control of advisory client funds so they could siphon off those funds for their own personal benefit.”

The SEC’s complaint charges Sugarman with violating or aiding and abetting violations of the antifraud provisions of the federal securities laws and related rules and seeks monetary and equitable relief against Sugarman.


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