Devon Archer, a prominent figure in a complex financial fraud scheme, has been sentenced to prison for defrauding a Native American tribal entity and multiple investment advisory clients. The sentencing, overseen by the Honorable Ronnie Abrams in the Southern District of New York, marks a significant development in one of the most elaborate financial fraud cases in recent years. The scheme involved issuing fraudulent bonds and misappropriating millions of dollars, leading to severe losses for unsuspecting investors and the Wakpamni Lake Community Corporation (WLCC), the Native American tribal entity targeted in the fraud.
Devon Archer
The fraudulent scheme orchestrated by Devon Archer, along with Bevan Cooney, John Galanis, Jason Galanis, Gary Hirst, Michelle Morton, and Hugh Dunkerley, began in March 2014 and continued until April 2016. The conspirators used a series of deceptive tactics to induce the WLCC into issuing the “Tribal Bonds,” despite knowing the falsehood of the representation made by John Galanis. Concurrently, Jason Galanis gained control of Hughes Capital Management (Hughes), an investment adviser, with Morton and Hirst serving as CEO and CIO, respectively.
Devon Archer Arrested
Once the first series of Tribal Bonds was issued, Morton and Hirst misinformed clients of Hughes about the bonds’ true nature and invested their funds without disclosing material facts. Clients were not made aware that the Tribal Bonds did not align with their investment parameters, and significant conflicts of interest were kept hidden from them. As a result, clients found themselves unable to redeem or sell the illiquid bonds due to the lack of a secondary market.
Misappropriation of Bond Proceeds
The defendants proceeded to misappropriate the proceeds from the first Tribal Bond issuance. Dunkerley, under Jason Galanis’s direction, diverted a substantial portion of the bond proceeds to fund personal and business interests of the group. John Galanis secretly received a considerable sum from the bond issuance, which he used for extravagant personal expenses. Similarly, Jason Galanis utilized a portion of the proceeds to acquire a luxurious $10 million apartment in Tribeca, with Archer’s approval.
Recycling Scheme and Expansion of Fraudulent Activities
To perpetuate the fraud, the defendants used $20 million of bond proceeds from the first issuance to purchase the second round of Tribal Bonds, creating a façade of increased interest payable by the WLCC. However, the actual bond proceeds available for investment remained stagnant. Archer misrepresented the source of money used to buy the bonds and used them to meet net capital requirements at broker dealers in which he and others had vested interests. The recycled bond proceeds were further used to finance the acquisition of other companies as part of the defendants’ plan to build a financial services conglomerate, which Archer sought to control.
Sentencing and Restitution
Following a lengthy trial, Devon Archer was sentenced to a year and a day in prison. Additionally, he was ordered to forfeit $15,700,513 and make restitution of $43,427,436 to the victims of the fraud. The sentencing serves as a stern warning to those engaged in financial fraud, highlighting the consequences that await those who deceive investors and misuse funds.
Devon Archer’s sentencing represents a significant step in bringing those involved in financial fraud to justice. It underscores the importance of robust regulatory enforcement and the vigilance required to safeguard investors and financial markets. The case serves as a stark reminder that fraudulent activities will not go unnoticed, and individuals engaging in deceptive practices will be held accountable for their actions.