SEC Admits that it Rigged Share Prices!

I find it hard to believe this, but the SEC press release explicitly says that as part of its sting operation, it and the FBI did actually manipulate the share market – the SEC/FBI “bought the stock defendants were promoting. Every buy transaction had a material effect on the stock trading volume of the companies in question”. Will the SEC/FBI compensate genuine investors who traded on the basis of the false volumes or prices? The SEC says “Our office worked closely with the criminal authorities and provided information and technical assistance throughout the FBI sting operation in order to minimize harm to innocent investors.” But minimize is not the same as prevent.

Another puzzling thing in the press release is that after saying that “In fact, there was no hedge fund”, it goes on to say that “the hedge fund bought the stock”. Perhaps, it was a drafting error in the press release.

Posted at 4:35 pm IST on Sun, 9 Dec 2007         permanent link

Categories: manipulation, regulation

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