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GalaxiWorld.com Wins Appeal in Civil Case

GalaxiWorld, based in Gibraltar, has operated an online casino from St. Kitts since December 1998.

The former shareholders, in a class action suit, had alleged that the company and its top executives – Jack Banks and Larry Weltman – "committed fraud to inflate the company's stock price by misrepresenting facts about the company's acquisition and operation of a gambling paper product business, the Specialty Manufacturing Division of Ace Novelty Inc.," according to the National Law Journal.

While the case was pending, GalaxiWorld got into a billing dispute with its New York law firm, Proskauer & Rose. The firm, the National Law Journal said, withdrew as GalaxiWorld's lawyer in the case and got a "retaining lien" on its GalaxiWorld files.

Meanwhile, the unhappy shareholders moved for a default judgment against the company. A federal judge in New York granted the default judgment of $22 million.

The appellate court ruled, the National Law Journal said, that the default judgment was improper because GalaxiWorld had only a short time to find new lawyers in its complicated case and also was unable to give any new lawyers a complete case file due to the lien held by the company's previous law firm.

In fall 1999, GalaxiWorld was taken private in a transaction in which shareholders were offered $1.50 a share. The stock had reached a high of $26.50 in December 1998.

This civil case has no bearing on a criminal case which was concluded in September 2000, when Banks and Weltman settled charges of fraud and grand larceny that were brought by the State of New York. They agreed to fines totaling $1 million and five years' probation. They are prohibited from serving as officers of a public company or holding more than 9 percent of the stock in one.

The New York branch of a British bank lost $28 million of the $32 million it had loaned to Banks and Weltman. The loan had been secured by stock, but the District Attorney said the pair had artificially inflated the value of the stock by not telling the bank that they didn't have the licenses required to operate one of the companies that their firm, a predecessor to GalaxiWorld, had acquired.

Banks and Weltman lived in the Toronto area. Under the terms of the criminal conviction, they cannot return to the U.S., unless a court orders them to do so. Banks has also been known as Jacque Banques, Jacques Banquesus and Jacques Besquesis.

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