The SEC charged a Los Angeles man on Wednesday for helping to orchestrate a fraud that involved the theft of $43 million in investor funds meant for the purchase of Native American tribal bonds.
Jason Sugarman helped carry out the scam during a three-year period starting in 2013 by securing financing to acquire control of registered investment advisors that he and his associates controlled and used to purchase Native American tribal bonds with client funds, according to the SEC complaint.
The prosecution of the case began in 2016 when charges were filed against seven others who were involved in the fraud. Additional defendants have been added since that time.
The bond sale proceeds were supposed to be invested in annuities to benefit the tribal corporation and repay the bondholders, but Sugarman and his associates instead stole the money and used it for themselves, the SEC complaint said.
Sugarman "was the biggest winner from the fraud, ending up with voting control over corporate assets that were acquired with bond proceeds, and from which he ultimately siphoned almost $9 million in cash for his direct and personal benefit," the SEC complaint states.
Sugarman directed the scheme along with Jason Galanis, whom the SEC has previously charged with securities fraud, along with several other individuals, including Galanis's father, for their roles in the tribal bond scheme, the SEC said.
Galanis, who pleaded guilty to parallel criminal charges arising from his role in the tribal bonds scheme, is currently incarcerated, the SEC said.
“These charges reflect that orchestrating a scheme from behind the scenes does not insulate someone from liability,” Sanjay Wadhwa, senior associate director of the SEC’s New York office, said in a prepared statement. “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 civil complaint charges Sugarman with violating or aiding and abetting violations of the antifraud provisions of the federal securities laws and related rules, the SEC said.