U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25611 / January 11, 2023
Securities and Exchange Commission v. Jason Sugarman, No. 19-cv-5998 (S.D.N.Y., filed June 26, 2019)
SEC Obtains Final Judgment Against Defendant Charged in $43 Million Tribal Bonds Scheme
On January 10, 2023, the United States District Court for the Southern District of New York entered a final consent judgment against defendant Jason Sugarman, ordering him to pay over $10.2 million dollars in disgorgement, interest, and penalties. The judgment resolves the SEC’s charges against Sugarman for his role in a scheme to defraud ten pension funds out of $43 million in connection with the issuance of limited recourse Native American tribal bonds between 2014 and 2015.
According to the SEC’s complaint(filed on June 27, 2019, and amended on November 2, 2022) Sugarman, and his partner Jason Galanis, acquired control of two investment advisers so that they and their associates could use the advisers’ clients’ funds to purchase Native American tribal bonds. While the bond sale proceeds were supposed to be invested in annuities to benefit the tribal corporation and repay the bondholders, the complaint alleged that Sugarman and his associates instead misappropriated the proceeds for their own benefit, including using proceeds of the initial round of bond sales to finance the acquisition of a foreign insurance company that was, in turn, used to acquire the second investment adviser used in the scheme.
This action followed the SEC’s case against eight other participants in the scheme, SEC v. Archer, 16 Civ. 3505 (GHW) (OTW) (S.D.N.Y.), and the criminal indictments and convictions of seven of those defendants, including Galanis, in a parallel criminal case, United States v. Galanis, 16 Cr. 371 (RA) (S.D.N.Y.).
Without admitting or denying the SEC’s allegations, Sugarman consented to entry of a final judgment permanently enjoining him from violations of the antifraud provisions of Section 17(a)(1) and (3) of the Securities Act of 1933, Section 10(b) the Securities Exchange Act of 1934 and Rule 10b-5(a) and (c) thereunder; ordering him to pay disgorgement in the amount of $7,157,232.19, plus prejudgment interest thereon in the amount of $1,317,703.82, and $1,789,308.05 in civil penalties; and barring him from serving as an officer or director of a public company for three years.
The SEC’s investigation was conducted by Tejal D. Shah, Nancy A. Brown, Christopher Ferrante, and Adam S. Grace of the SEC’s New York Regional Office, under the supervision of Sanjay Wadhwa. The SEC’s litigation was led by Ms. Brown, Ms. Shah and Mariel Bronen, under the supervision of Sheldon L. Pollock, and with the assistance of Alistaire Bambach and Therese A. Scheuer.