In a Complaint dated October 22, 2009, the United States Securities and Exchange Commission (SEC) alleged that from September 29, 2009, through October 2, 2009, Lambros D. Ballas engaged in a fraudulent scheme to manipulate the stock price of multiple publicly traded companies (including Google, Microsoft, and Walt Disney) by disseminating phony press releases and then hyping them on Internet bulletin boards such as Yahoo!.
For example, on September 29, 2009, Ballas issued a phony press release announcing that Pennsylvania biotech company Discovery Laboratories had obtained approval from the U.S. Food and Drug Administration for a drug under development. Ballas then posted a message on a stock message board with a link to what he described as the company's "official press release." In his post, Ballas claimed to have called his "personal broker" who "says it's been confirmed." Discovery Laboratories' stock price shot up nearly 50%.
The next day, September 30, Ballas issued a release falsely claiming that IMAX Corporation had been acquired by Disney. Once again he followed up by posting links to the phony release on a stock message board, telling other potential investors that he had bought 10,000 IMAX shares and that his broker "just called me to tell me at the crack of dawn."
On October 1, Ballas issuing a phony press release stating that California search engine company Local.com was being acquired by Microsoft. Ballas followed this by again posting messages and links to the Local.com release on stock message boards. In one posting he stated: "Local just bought out by Microsoft, at $12.50 per share including patent ownership." In aftermarket trading, Local.com's stock price rose over 75%. Later that night, Local.com issued a corrective release saying that the Microsoft release had been false -- there was no Microsoft acquisition. Undeterred, the next day Ballas issued another phony release, this time stating that it was Google, and not Microsoft, that was acquiring the company.
It would have been bad enough if Ballas were simply another online pumper, dumper, or scammer. What makes this worse is that, Ballas, a 34-year-old resident of Huntington, New York, was a registered representative associated with an SEC registered broker-dealer. This wasn't just another yutz trying to make a quick, dirty buck. Ballas was a stockbroker.
See, SEC v. Ballas
Federal Court Injunction
On July 8, 2010, Lambros D. Ballas was permanently enjoined from issuing or causing to be disseminated false or misleading press releases and Internet postings, or other public statements regarding publicly traded or quoted companies where such conduct would constitute an actual or threatened violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. See, Securities and Exchange Commission v. Lambros D. Ballas, (Civil Action Number 5:09-cv-05036, United States District Court for the Northern District of California, San Jose Division).
SEC Administrative Proceedings
On July 28, 2010, the SEC initiated public administrative proceedings pursuant to Section 15(b) of the Securities Exchange Act of 1934 ("Exchange Act"), against Ballas. In the Matter of Lambros D. Ballas (Order Instituting Administrative Proceedings, '34 Act Rel. # 62581, Admin. Proceeding # 3-13981, July 28, 2010).
Note that Ballas is considered innocent and the above statements are merely allegations until and unless he is found guilty.
Bill Singer's Comment:
As one who has been bedeviled by the pumpers, dumpers, and scamsters who haunt the Internet, it's nice to see that the SEC is finally taking the complaints about such fraud seriously.
While many regulators pooh-pooh the seriousness of online fraud as little more than childish shenanigans, the fact is that millions of investors (and potential investors) follow stocks on Yahoo! and other online communities. While we may wish that investors were more sophisticated and did not base investment decisions upon anonymous online postings, the fact is that many folks decide to buy, sell, or hold after reading what they believe is the "truth" on a forum or chat room. Rather than laugh at the stupidity of relying upon such nonsense, Wall Street's regulators need to root out the fraud and impose severe penalties on the con artists behind the lies. Hopefully, this case is an indication of more to come.
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