(September 20 -17:55 ET) – Earlier today, the Securities and Exchange Commission brought and settled civil fraud charges against a New Jersey boy for an online stock touting scam.
The SEC says that Jonathan Lebed, age 15, used the Internet to conduct a stock manipulation scheme that made total profits of US$272,826. Without admitting or denying the findings, Lebed settled with the SEC, agreeing to an administrative cease and desist order, to disgorge his illegal profits and pay prejudgment interest of US$12,174. This is the first time the SEC has brought charges against a minor.
The commission found that on 11 separate occasions between August 23, 1999 and February 4, 2000, Lebed purchased large blocks of thinly-traded microcap stocks through brokerage accounts. Within hours of making the purchase, he sent numerous false and/or misleading unsolicited e-mail messages, or “spam,” primarily to various Yahoo! Finance message boards, touting the stock he had just purchased. He then dumped his shares, usually within 24 hours, profiting from the increase his messages had caused. In some instances, he placed sell limit orders before the market closed on the day he purchased the stock to ensure that he would not miss the price increase of the stock while he was in school the next day.
The SEC also found that Lebed used multiple fictitious author names for the hundreds of identical messages he posted. The postings included baseless price predictions and other misleading statements. For example, he claimed in one of his messages that a company trading at $2 a share would be trading at more than $20 a share “very soon.” These sorts of messages are familiar to anyone who uses these message boards, but in this case the SEC says they always caused the price and volume of the touted stocks to increase dramatically.
-IE Staff