Investors in Bermuda reinsurer Gerova Financial and Stillwater Capital who have followed the recent tempest around these two have probably heard of Fund.com and Jason Galanis, and not in a way conducive to warm, fuzzy feelings.
The question is: Have Fund.com investors and affiliates such as Weston heard of Jason Galanis? I mean, really heard of him.
To get to the man behind the mask, though, let’s first look at the mask.
Fund.com began with a bit of a bang.
Re-imagined in late 2007 as “a provider of fund management products and risk management solutions” for investment advisers to create and manage wealth, privately-held Fund.com made its debut to the public through a reverse merger with public Eastern Services Group, a state and local tax advisor for Nevada casinos. In March 2008, it shelled out nearly $10 million in cash for the domain name “fund.com,” a record at the time according to Clek Media.
Having no revenues since its 2007 inception and no real operating subsidiary other than ESG, the casino tax adviser, Fund.com went on a path of growth through acquisition.
It took a stake in AdvisorShares, a developer of proprietary exchange traded funds, in 2008, then bought Whyte Socratic, a developer of online education programs for investors, debtors and professionals, in 2009. Finally, it purchased hedge fund adviser and incubator Weston Capital in the first quarter of 2010.
According to Bloomberg’s Market Data Fund.com shares had a fiendishly volatile past few years hitting closing peaks of $539 a share (with intraday levels at $1205) in July 2008 and lows of $16 in May 2009. Still, shares went for as high as $121 a piece as recently as one year ago.
It’s been a downward spiral since then. The company has had to declare most of its prior financials unreliable because of a soured business deal in late 2009 and keeps promising to restate them in full. To date no such restatements have been filed.
Some of its senior executives have been connected to various shady enterprises, such as the afore-mentioned Gerova Financial and also Westmoore Capital, from which Fund.com raised $1.5 million in 2008. Westmoore Capital was closed down by the SEC for running a $53 million Ponzi scheme.
Out of the 12 disclosure reports required of it as a public company for 2009 and 2010 (the law requires that public companies file 4 such reports per year), the company has failed to timely file 9 times. It has filed no report in 2011 yet, so to find independently certified accounts investors have to go back to the 2009 numbers, audited by a 6-person Hollywood, Florida accounting shop.
An unusually large 1 for 120 reverse split at the end of September, Fund.com shares failed to stop the share price slide. Fund.com lost 99% of its value in the past year and is now traded in the “pink sheets”. Current market value of the company is at around $8.4 million, with share price at $1.40 on volumes between 5,600 and 267 shares.
Enter Jason Galanis.
In a telling expose in Neil Weinberg’s Forbes blog, we learn that Galanis is the son of a known con-man John P. Galanis and a known associate of the Orange County scammers from Westmoore. Among his resume highlights is an arrest (but no charge or prosecution) in a drug-dealing case that sent his brother up the river for 11 years.
Another badge of honour — in 2007 Galanis forged the signature of the CEO of his then employer, Penthouse International, on a Sarbanes-Oxley certification as part of a scheme to commit financial statement fraud. He got a fine and a 5-year ban from serving as director or officer of a public company for his troubles.
The U.S. government has suggested that Galanis may have ties to Kosovo warlords and has attempted to develop ties with the Gambino mobsters.
Late last year, Galanis was sued by former Red Hat CEO Szulik for stealing $4 million from the CEO’s family investment trust.
He is also named as a defendant in a recent class action suit by investors in Gerova Financial, a NYSE-listed shell company purporting to offer regulatory capital to capital strapped companies, for orchestrating fraud and wasting company assets while in the employ of Gerova.
This is the Jason Galanis behind Fund.com.
A review of Fund.com’s latest annual report shows that Equities Media Acquisition Corp is the largest shareholder of Fund.com with a 28% voting stake and has been so pretty much from the get-go in early 2008. Neil Weinberg’s blog reveals that EMAC is managed by Galanis and is headquartered near his home.
And we also learn that pump-and-dump and self-dealing schemes have often been imputed to companies connected to Galanis and Westmoore.
Another imputation may be warranted here but we needn’t go that far. With or without a scheming Caliban in it, this tale is surely strange. And for Weston Capital and Fund.com’s investors, strange, too, are the bedfellows that Galanis and Westmoore Capital make.