Out-Law / Your Daily Need-To-Know

15 year old boy charged with manipulating stock profits on-line

Out-Law News | 22 Sep 2000 | 12:00 am | 1 min. read

The US Securities and Exchange Commission this week settled civil fraud charges against Jonathan G. Lebed from New Jersey, aged 15, for using the internet to conduct a stock manipulation scheme that made profits exceeding $270,000.

Without admitting or denying the findings, the boy settled with the Commission, agreeing to discontinue his on-line trading activities and to repay the illegal profits and interest. The case is the first time the SEC has brought charges against a minor.

The practice began when Lebed was just 14. Using brokerage accounts, he purchased a large block of shares and within hours he sent numerous false and/or misleading unsolicited e-mail messages, or spam, primarily to various Yahoo! Finance message boards touting the stock he had just purchased. Using false names, he claimed that a company trading at $2 per share would be trading at more than $20 per share "very soon." Other postings claimed that a stock would be the "next stock to gain 1,000%," and was "the most undervalued stock ever."

Lebed sold all of the shares, usually within 24 hours, profiting from the increase in price his messages had caused. In some instances, Lebed placed a sell limit order before the market closed on the day he purchased the stock to ensure that he would not miss the price increase of the stock while he was in school the next day.

Ronald Long of the SEC said, "I implore investors to be highly sceptical of any advice they receive from the internet. People should do thorough research before making investment decisions and verify all information before acting on it."