By: Ellen Cans
On Wednesday, a fraud complaint was filed by the Securities and Exchange Commission against a NYC Taxi medallion company owner.
As reported by the NY Post, Andrew Murstein, the president and chief operating officer of Medallion Financial Corp., allegedly paid for favorable news stories about his struggling company in order to lift its stock price. The 57-year-old allegedly thought up the scheme as the growth of Uber and Lyft have led investors to lose favor in taxi-related stocks. The SEC says, the business owner’s plan included hiring media strategists to write articles boosting his company without letting on that they were being paid. The strategists allegedly used fake names for roughly 50 articles about Medallion Financial on sites including TheStreet, HuffPost, Seeking Alpha and Crain’s New York Business from 2014 to 2017, the complaint says.
“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,” said SEC New York regional director Richard Best. Murstein also personally edited many of the blogs himself, the complaint adds. In addition, he pressured accountants to give Medallion Financial a higher valuation than justified, as per the SEC.
On Wednesday, after news of the SEC filing, the stock price for Medallion Financial fell about 21 percent, closing at $6.67 per share for the day. The company, which went public in 1996, has an all-time high stock price of around $17, last reached in 2013. The firm helped revolutionize the taxi industry by making risky medallion loans to low-income drivers, but since ride sharing apps gained speed without the need for medallions, the value of taxi medallions plummeted. Medallions give holders the right to drive a yellow cab in New York City. Medallion Financial’s shares, suffered hitting a low of $2 at one point in 2017. “Under pressure to do something, Murstein violated the federal securities laws,” the SEC said.
In a statement to The Post, a spokesperson for Medallion Financial said the company plans to “vigorously defend against the SEC’s unfounded charges and are confident we will be completely vindicated.”
The rep didn’t deny that they secretly paid for articles, but said it was conducted in “good faith.” “Medallion sought only to provide the market with an accurate understanding of the Company’s financial position and prospects and an appropriate and transparent valuation of Medallion Bank and its other assets,” the company spokesperson said. “None of the allegations in the SEC complaint gives rise to a securities violation.”