Today, shares of Medallion Financial (NASDAQ:MFIN) are plunging more than 30% after the U.S. Securities and Exchange Commission alleged the company and its COO are engaging in fraud. During the pre-market session, MFIN stock plunged to a 13-month low, but has since recovered some of its losses.
According to the complaint, Medallion engaged in two forms of fraud. First, the SEC claims that Medallion and COO Andrew Murstein paid a media strategist working for Ichabod’s Cranium to publish positive stories about Medallion on several news outlets. These news outlets included Seeking Alpha, The Huffington Post and The Street. Regulators also believe that the media strategist was paid to create fake identities to make the stories appear more credible. As part of this, the SEC has also charged Ichabod’s Cranium and its CEO, Lawrence Meyers, with fraud.
Richard Best, the director of the SEC’s regional New York office added that:
“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were really paid advertisements placed across the web in an effort to deceive investors about the value of Medallion’s stock.”
The second complaint from the SEC alleges that Medallion fraudulently increased the carrying value of Medallion Bank, which is a wholly owned subsidiary of Medallion Financial. The reason for this was to offset losses from its taxicab medallion loan business. A taxicab medallion is a transferrable...
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