Stock Fraud for Dummies
What a difference the Web makes. It's dizzying to contemplate the fact that some guy in Houston was able to knock $7.1 billion off the stock market value of Lucent Technologies simply by posting a fake press release on a Yahoo bulletin board. Reuters reported the arrest yesterday of 43-year-old Fred Moldofsky. Investigators foiled his
alleged plan by collecting information from AOL, Moldofsky's ISP. He now faces both criminal and civil charges.
What's most amazing about Moldofsky's scheme is its simplicity. One is amazed that marauding teenage delinquents don't routinely send markets reeling. TheStreet.com reported that Moldofsky did little more than post a fake press release that said in part, "Based on preliminary
estimates, (Lucent) expects operating results for its second fiscal quarter of 2000 to be lower than analysts' estimates."
Then he called attention to the misinformation. Wrote TheStreet.com's Justin Dini, "During the afternoon of March 22, Moldofsky, using the screen name 'kauna_and_the_brain,' posted several messages reporting rumors that Lucent would not meet expectations, according to the civil complaint." He followed up by posting a message under the name hot_like_wasabe," with the bogus release attached, Dini wrote. Then, using the name "Floydian_us" - which was designed, Dini said, to resemble a screen name used by a frequent commentator on Lucent stock - Moldofsky posted a number of messages with links to his fake release. According to Dini, Moldofsky caused Lucent to tumble 3.6
percent the next day. On March 22, the story said, he had traded around 6,000 Lucent shares.
"If convicted," wrote the AP, "Moldofsky could face up to 10 years in prison and a fine of $1 million, or twice the gross gain or loss resulting from the crime." So much trouble for something so simple. And if Moldofsky was dumb enough to use an AOL account to commit the crime, what are the chances that he understood securities law? -
Michelle Goldberg
Day Trader Arrested for Posting Fake Lucent Earnings Warning (TheStreet.com)
nytimes.com
(Registration required.)
Texas Day Trader Arrested for Fraud (AP)
mercurycenter.com
Day Trader Busted for Posting Bogus Lucent Release (Reuters)
mercurycenter.com
Day Trader Is Charged in Case Stemming >From Lucent Hoax
interactive.wsj.com
(Paid subscription required.)
Lucent Hoax Author Charged (Bloomberg)
usatoday.com |
