By: George M. Wilson & Carol A. Stacey<\/p>\n
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Over the many decades that equity securities have traded in the U.S., and over the centuries that equities have traded around the world, unscrupulous people have always tried to find ways to cheat others. From pump and dump schemes to fake analyst reports new ways are constantly evolving as less than ethical people look for a quick buck. One of the more recently developed sneaky tricks is to create a fictitious user ID in the SEC\u2019s EDGAR system and try to manipulate a company\u2019s stock with fake SEC filings such as tender offer documents. In a way this is kind of a \u201cpump and dump\u201d strategy, and it is all about fake news.<\/p>\n
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In February of this year an artist in Chicago used this trick to try and manipulate Alphabet\u2019s stock. In May 2015, Avon stock was used in a similar scheme. In September 2015, a person used an SEC filing in the name of \u201cLMZ & Berkshire Hathaway Co.\u201d to try and manipulate Phillips 66 and Kraft Heinz. The report was signed with a false name.<\/p>\n
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That same false name was used on a filing to announce a fake tender offer for Fitbit in November 2017.<\/p>\n
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When there are new kinds of crimes, the SEC sets out to develop the right tools and techniques to find the perpetrators and protect investors and the markets from bad actors. They are making progress with this new kind of electronic and internet based crime. On May 19, 2017, fairly soon after the Fitbit false filing, the SEC announced an enforcement action against Robert W. Murray, the alleged perpetrator of this fraud, with a parallel criminal action by the U.S. Attorney\u2019s Office for the Southern District of New York. Mr. Murry is a mechanical engineer based in Virginia.<\/p>\n
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According to the SEC Murray wove a tangled technical trail:<\/p>\n
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The SEC alleges that Murray created an email account under the name of someone he found on the internet, and the email account was used to gain access to the EDGAR system.\u00a0 Murray then allegedly listed that person as the CFO of ABM Capital and used a business address associated with that person in the fake filing.\u00a0 The SEC also alleges that Murray attempted to conceal his identity and actual location at the time of the filing after conducting research into prior SEC cases that highlighted the IP addresses the false filers used to submit forms on EDGAR.\u00a0 According to the SEC\u2019s complaint, it appeared as though the system was being accessed from a different state by using an IP address registered to a company located in Napa, California.<\/p>\n
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In the words of enforcement, this attempt to hide his actions did not work:<\/p>\n
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\u201cAs alleged in our complaint, Murray used deceptive techniques in a concerted effort to evade detection, but we were able to connect the dots quickly and hold him accountable,\u201d said Stephanie Avakian, Acting Director of the SEC Enforcement Division.<\/p>\n
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For all his effort, and for the potential consequences, Murray\u2019s ill-gotten gains in this scheme were only about $3,100!<\/strong><\/p>\n <\/p>\n Always fun to see how new ways to try and cheat don\u2019t evade the consequences!<\/p>\n <\/p>\n As always, your thoughts and comments are welcome!<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" By: George M. Wilson & Carol A. Stacey Over the many decades that equity securities have traded in the U.S., and over the centuries that equities have traded around the world, unscrupulous people have always tried to find ways to cheat others. From pump and dump schemes to fake analyst reports new ways are … Continue reading Fake SEC Filings and Enforcement in the Electronic Age<\/span>