The men behind a Bermuda-registered financial-services firm have been charged by regulators in connection with an alleged $16 million fraud in the US.

The Securities and Exchange Commission (SEC) claims six men involved with the Gerova Financial Group, formerly based in Cumberland House, Victoria Street, Hamilton, hatched a plot to dump millions of the company’s shares in an unregistered offering and distribution.

The SEC alleges that Jason Galanis enlisted his father John Galanis, his two brothers Jared and Derek, a family friend from the Republic of Kosovo and a Gerova director Gary Hirst and Gavin Hamels, an American investment adviser, to carry out the 2010 scheme.

An SEC filing with the United States District Court, Northern District of New York, said: “Eventually, Gerova’s share price tumbled in reaction to the massive sell-off engineered by Jason Galanis.

“To stem the price decline, Jason Galanis orchestrated a second phase of the scheme to artificially stabilise Gerova’s stock price: he bribed two investment advisers to buy Gerova shares in their respective clients’ accounts in order to create demand for the stock.

“All told Jason Galanis’ scheme reaped him and his family members over $16 million, all at the expense of unwitting investors.”

The court was also told that Jason Galanis, 45, who lives in Los Angeles, California, had also been banned in a previous case from serving as an officer or director of a public company for five years, to run from 2007 to 2012 and ordered to pay $60,000 in civil penalties.

But the filing with the US court that Jason Galanis was “instrumental in the formation and development of Gerova” and in 2006 advised members of a wealthy family from Macau, China, on potential investments.

He later introduced a member of the family to a Gibraltar-based fund, the Gibraltar Fund, controlled by one of his business associates, to discuss the set-up of a special purpose acquisition vehicle (SPAC) to focus on acquisitions based in Asia.

The Gibraltar Fund and the Macau family agreed to set up Asia Special Situation Acquisition Corporation (ASSAC), which was formed as a SPAC in the Cayman Islands in March, 2007.

Jason Galanis was paid a $600,000 fee for his part in the deal and also entered into a consulting agreement with the Gibraltar Fund, which entitled him to 30 per cent of the profits the Gibraltar Fund made from the SPAC.

ASSAC changed its name to Gerova Financial Group in January, 2010.

The SEC filing to the court said: “Far beyond the terms of his consulting agreement with the Gibraltar Fund, Jason Galanis substantially influenced the management, operation and business direction of Gerova from its inception.

“He regularly attended Gerova board meetings and had pre-existing business relationships with members of the board; he consulted management, company counsel and the board on senior management hiring and firing decisions; he reviewed draft commission filings and consulted Gerova’s officers, directors and company counsel concerning disclosures made therein; he interacted with Gerova’s public relations firms concerning the content of Gerova’s press releases and gave orders to Gerova’s counsel and management concerning actions to be taken with respect to its securities.”

The SEC filing said that Jason Galanis, “mindful of the officer and director bar imposed on him ...”, made sure that his official capacity at the company was limited, holding himself out as investment banker or adviser to the company.

But the filing added: “However, in October 2010, he became CEO of a Gerova subsidiary, Gerova Advisors LLC, in order to formalise his relationship with the company.

“In that capacity, Jason Galanis was to receive success fees upon the consummation of material financings or acquisitions by Gerova that were introduced or consulted on by Gerova Advisors.”

The SEC also alleges that Jason Galanis’ senior role in Gerova, as well as his close relationships with senior officers and board members, or his substantial holdings of Gerova stock through several shell companies.

Gerova companies remain listed on the Bermuda Register of Companies.

But a spokesman for the Bermuda Monetary Authority, which regulates the financial services industry, said: “There are currently no Bermuda Monetary Authority-licensed entities related to this matter.”

The Royal Gazette reported in 2012 that the firm had sought US bankruptcy court protection, listing debts of as much as $500 million.

The company, formerly known as Asia Special Situations Acquisition Corporation, took the step to protect its assets from creditors. Gerova said then its assets were listed as more than $50 million.

Gerova also began liquidation proceedings in Bermuda in July that year.