The SEC announced today that it has charged Richard Karp with fraud for writing and disseminating a fake press release that, when reported in the media, caused a company’s stock price to spike and allowed him to make thousands of dollars in illicit profits. This marks the [insert your own large number here] time in a row that a trader seeking to profit through the use of a phony press release has been caught and sued by the SEC.
The SEC alleges that Karp created the phony press release as an announcement from WCI Communities, Inc., and he faxed it to media outlets in an effort to manipulate WCI’s stock price. The press release falsely stated that WCI’s board of directors received a buyout offer potentially worth $220 million. The SEC alleges that after this fake news was reported by the media, WCI’s share price increased dramatically and Karp quickly sold his shares to generate his illegal profits.
The case against Karp follows several similar cases that the SEC gas brought through the years, including:
- SEC v. Fred Moldofsky (alleging a fake press release about a Lucent Technologies’ quarterly earnings shortfall posed on a Yahoo! Finance message board).
- SEC v. Mark Jakob (alleging a fake press that claimed the SEC was investigating Emulex’s accounting practices, that its CEO had resigned, and that it would revise its earnings to report a loss instead of a profit. In the 16 minutes following the press release, Emulex lost $2.2 billion in market value).
- SEC v. Ned Sneiderman (alleging a fake press release on a Yahoo! bulletin board purporting to announce that Extreme Networks was acquiring Viasource Communications).