A student, Mark Jakob, is being charged with interstate wire
fraud and securities fraud. The press release, appearing to come
from Emulex, appeared on the Internet Wire news dissemination
service that claimed the company’s chief executive was resigning,
that the company would restate its fourth quarter earnings, and
that Emulex was under investigation by the Securities and Exchange
Commission. The release was picked up by and displayed on other
on-line news services.
Jakob is suspected of making between $230,000 and $240,000 from
trading in shares at the time the press release was circulating.
The company’s market capitalisation dropped $2.5 billion before the
hoax was discovered and Nasdaq halted trading in the stock. The
share value eventually recovered.
The FBI apparently traced the e-mail of the press release to a
computer at the library of El Camino Community College where Jakob,
who had previously worked at Internet Wire, had been seen working
the night before the scam took place. He had allegedly invested in
“short sales,” basically a gamble that a share price will fall.
If convicted, Jakob faces a maximum 15 years imprisonment.
