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.