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News Release: 00-11
GRAY DAVIS, Governor
Date: 06/20/00
WILLIAM KENEFICK, Acting Commissioner
Department of Corporations Files Internet Market Manipulation Action
Los Angeles, June 20, 2000 — In what is believed to be one of the first Internet market manipulation cases filed by a state securities agency, the California Department of Corporations announced today that it has obtained an injunction, a retraction, a fine and costs in an Internet market manipulation action filed against Victor Idrovo, a Manhattan Beach investor, for posting "false or misleading" messages on an Internet message board "intended to affect the offer, purchase, and sale" of the stock of Metro-Goldwyn-Mayer Inc. (NYSE: MGM).
In the lawsuit, the department alleged that on two occasions in 1999, Mr. Idrovo posted messages on a Yahoo! FINANCE Message Board using the name of Frank G. Mancuso, the former Chairman and Chief Executive Officer of MGM. According to the complaint, the messages were "false or misleading" and constituted "acts, practices and a course of business to deceive investors." The defendant stipulated to the injunction and penalties without admitting or denying the allegations.
The defendant was a frequent trader with a pattern of both long and short selling of MGM stock through several online brokerage accounts. He allegedly claimed to be Frank Mancuso on two separate occasions during which he posted false and misleading information about MGM.
The action represents the latest effort by the department to police stock fraud on the Internet and follows earlier sweeps by the department of entertainment scams, foreign currency scams, microcap fraud and promissory note scams using the Internet as a marketing tool. Since setting up an Internet Compliance and Enforcement Team last year, the department has issued 100 Desist & Refrain orders against 274 entities and individuals for illegal and fraudulent securities offerings on the Internet, brought five civil cases against 55 defendants and participated in the filing of six criminal cases against 22 defendants.
A department spokesperson said: "The Internet is now the marketing vehicle of choice for con artists. We are seeing illegal and fraudulent offers and sales of securities, unlicensed broker dealer, agent and investment adviser activity, insider trading and market manipulation. As more people trade online and look to the Internet for information, the opportunities for investment fraud and market manipulation schemes that have the potential to reach millions of investors increase daily."
By filing the lawsuit, the department hopes to send the message that state securities regulators and law enforcement agencies will be actively policing the Internet for illegal activity and fraud in the investment marketplace and that hiding behind fictitious identities will not prevent the perpetrators of these activities and schemes from being detected.
Additional information can be obtained from the Department of Corporations’ Website at www.corp.ca.gov and the North American Securities Administrators
The Department of Corporations is California's Investment and Financing Authority, reporting to the Business, Transportation and Housing Agency and the Governor. The Department is responsible for the regulation, enforcement and licensing of securities, franchises, off-exchange commodities, investment and financial services, independent escrows, consumer and commercial finance lending and residential mortgage lending. For further information or to obtain a complaint form, see the Department's Web site at www.corp.ca.gov.
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