This story was up to date at 11:34 a.m. Eastern to include things like a assertion from the firm.
When trip-sharing organizations like Uber and Lyft decimated the taxi marketplaces in main towns, the organization of lending to taxicab owners and operators fell by way of the ground. Medallion Money, whose main company was creating financial loans backed by taxicab medallions (essentially, operating permits), noticed its stock value nosedive.
To arrest the slipping shares, amongst 2014 and 2017 Medallion Financial and its president and COO, Andrew Murstein, devised two schemes that ran afoul of U.S. securities rules, in accordance to a complaint submitted by the Securities and Trade Fee.
First, in 2015 Medallion and Murstein hired a “stealth” public relations company, Ichabod’s Cranium, to article good stories about the corporation and tout its stock. The posts, some appearing on Huffington Article, Looking for Alpha, and TheStreet.com, applied bogus identities, and the payments to the media relations business were not disclosed. The promoters of Medallion’s stock also did not disclose their affiliation with the enterprise.
“Murstein allegedly paid for additional than 50 articles or blog posts and hundreds of optimistic comments, which ended up genuinely paid advertisements positioned across the website in an effort to deceive traders about the benefit of Medallion’s stock,” said Richard Greatest, director of the New York regional office environment.
2nd, Medallion and Murstein fraudulently greater the carrying worth of Medallion Lender, a subsidiary of Medallion Financial, to offset losses relating to the taxicab medallion financial loans. The SEC alleges that when the company’s existing valuation firm refused to cave to Murstein’s strain to increase the bank’s valuation, Murstein fired the organization and hired an financial investment lender to present an inflated valuation of the bank.
“Murstein quickly located an investment financial institution that was lured by his quid professional quo supply: supply the requested valuation range in trade for substantially much more beneficial expense banking operate in the foreseeable future,” according to the SEC grievance.
Explained Ideal: “Companies … are not able to shop for greater valuations when there is no proof to help them.”
Even with the deteriorating value of the collateral securing the bank’s personal loan portfolio, Medallion’s valuation jumped from $166 million in the next quarter of 2016 to $290 million in the fourth quarter of 2017.
The SEC charged that Medallion also designed phony statements in its SEC filings as to why the firm’s valuation greater, boasting that there have been functions intrigued in obtaining the lender and that a “court ruling involving a market lender” had heightened the desire of probable merger companions.
In a statement released the day the fees ended up created general public, Medallion Economic claimed: “We intend to vigorously protect from the SEC’s unfounded prices and are self-assured we will be entirely vindicated. … We believe that none of the allegations in the SEC criticism gives increase to a securities violation and are confident that the total file will exhibit that Medallion Financial Corp. and Andrew Murstein complied with the legislation.”
The corporation claimed that its actions have been made to deliver an accurate comprehending of the company’s financial place and a transparent valuation at a time when “short-sellers ended up engaged in an on the internet marketing campaign to travel down the company’s stock selling price for their personal income.”
Medallion famous also that “the SEC does not even allege that the company’s steps had any market place effect in any respect on the selling price of Medallion inventory and Murstein has under no circumstances marketed a one share of Medallion inventory.”
The SEC billed Murstein and Medallion with violating the antifraud, books and data, internal controls, and anti-touting provisions of federal securities legal guidelines. Murstein is also billed with creating wrong statements to Medallion’s auditor.
The complaint also rates Ichabod’s Cranium and its owner, Lawrence Meyers, with touting and fraud. The SEC seeks long-lasting injunctions, disgorgement moreover prejudgment curiosity, and civil penalties. In addition, the SEC seeks an officer-and-director bar in opposition to Murstein.