The culture of fake news has infected the market world as well. Since the volatility of investments is actually based on the influence of transient rumors and trends, quite a few companies resorted to fake promotional schemes. However, the Securities and Exchange Commission is not allowing this kind of treacheries under its watch. As a consequence, the agency has already announced charges against 27 individuals.
SEC Tracked Down 250 Articles that Resorted to Fake Promotional Schemes
On Monday, SEC claimed that the agency managed to identify 27 authors of fake promotional schemes. The official declared that these individuals were top executives within companies. They hired third-party groups to write and publish false statements that put their companies in a good light.
The result triggered a wave of artificial indexes that boosted the worth of the stocks within the market. All involved parties are liable to charges. Their devious machination relies on the undisclosed involvement of the third-parties with the companies they wrote about. SEC claimed that there were 250 articles that hid their affiliation.
SEC published several companies that resorted to these fake promotional schemes. Among them, there were three main public companies, namely Galena Biopharma, ImmunoCellular Therapeutics, and CytRx Corporation. There were also two former executives that received charges for these schemes together with seven stock communications companies. These former CEOs are Michael Ahn at Galena Biopharma and Manish Singh at IMUC.
Office of Investor Education and Advocacy Warns Investors of Ruses
SEC stated that the main guilt behind these devious operations was that the two parties didn’t disclose their agreement. This way, the articles took the appearance of impartial reviews. As a consequence, many investors relied on these materials to decide their next move in the market. However, their decisions ended up being orchestrated by undercover advertisements.
At the same time, the Office of Investor Education and Advocacy that pertains to SEC as well published a warning for investors. The post guides market players to avoid taking articles for granted, even though they claim to be independent and objective. The material has named nanocap and micro companies as the most vulnerable to fake promotional schemes.
“Microcap stocks, some of which are penny stocks and nano cap stocks, may be particularly susceptible to stock promotion schemes and other forms of market manipulation.”
Some of the named parties have already agreed to settle their charges with penalties that start at $2,200 and go up to $3 million. There are ten more other companies that did not admit to their fault yet.
Image source: 1