SEC accuses financial firm of illegally touting company to increase share price
The Securities and Exchange Commission (SEC) has accused a New York-based financial company and one of its executives of engaging in illegal activities to increase its share price.
The SEC indicted Medallion Financial Corp. and its president and chief operating officer, Andrew Murstein, by paying companies, Ichabod’s Cranium and others, to post positive articles about the company on various websites. Murstein was reportedly aware of the scheme to create false identities to make their opinion pieces appear credible to potential investors.
Medallion’s core business is providing taxi medallion-backed loans to taxi owners and operators. However, the popularity of ridesharing companies has resulted in a drop in the value of taxi medallions and, as a result, the Medallion share price. The complaint also alleges that Medallion and Murstein fraudulently increased the book value of Medallion Bank to offset losses related to the taxi locket loans. Further, the SEC said that when the existing valuation company refused to bow to pressure from Murstein to increase the bank’s valuation, Murstein fired the company and hired a new company to provide an inflated valuation of the bank. Bank.
“Murstein is said to have paid for more than 50 articles and hundreds of positive reviews, which were actually paid advertisements placed on the web with the aim of misleading investors about the value of Medallion shares,” said Richard Best, director of the New York regional office. . “Nor can companies seek higher valuations when there is no evidence to back them up.”
Murstein and Medallion were charged with violating the anti-fraud provisions, books and records, internal controls and anti-bragging provisions of federal securities laws. Additionally, Murstein is accused of making false statements to Medallion’s auditor. The complaint also accuses Ichabod’s Cranium and its owner, Lawrence Meyers, of soliciting and fraud.
The SEC is asking for permanent injunctions, restitution plus pre-judgment interest and civil penalties. In addition, the SEC is seeking an officer and director bar against Murstein.
The investigation was conducted by Olivia Zach, Kenneth Gottlieb and David Stoelting and overseen by Celeste Chase and Richard Best of the New York regional office.