It’s no secret at this point that Uber and Lyft’s The arrival on the VTC scene in the early 2010s dealt a blow to the traditional taxi industry, but the costs deposit this week by the Securities and Exchange Commission (SEC) show how far one company, Medallion Financial of New York, was willing to go to stay relevant.
In its filing, the SEC accused the company and CEO Andrew Murstein of partnering with a California media strategy firm called Ichabod’s Cranium to publish fabricated positive stories in major publications using fake identities in a desperate attempt. to increase the company’s stock price between 2014 and 2017. These stories would have ended up on leading sites like The Huffington Post, SeekingAlpha and TheStreet.com.
“Murstein is said to have paid for more than 50 articles and hundreds of positive comments, which were actually paid advertisements placed on the web with the aim of misleading investors about the value of Medallion shares,” said the director of the SEC from the New York regional office, Richard Best. A declaration.
In addition to paying for articles, the SEC accused Medallion of pressuring investment banks to inflate the value of Medallion Financial. âCompanies also can’t seek higher valuations when there is no evidence to back them up,â Best added. Medallion stock took 56% dive in pre-marketing exchanges following the announcement of charges.
Murstein and Medallion are both charged with violating the anti-fraud provisions, books and records, internal controls and anti-bragging provisions of federal securities laws, while Murstein is also charged with making false statements to the Medallion auditor.
Of course, that’s not how Medallion sees it. In one declaration Provided to Al Jazeera, Medallion denied that any of the SEC’s allegations amounted to securities fraud and said it planned to “vigorously defend itself against the SEC’s unfounded accusations.”
In a separate statement emailed to Gizmodo, Medallion reiterated its belief that the SEC accusations did not constitute securities fraud, without denying specific details alleged in the SEC complaint.
“The actions in question took place five or more years ago at a time when short sellers were engaged in an online campaign to lower the company’s stock price for their personal gain by disseminating misleading information and disparaging and distorting its business, âsaid Medallion. âMedallion sought only to provide the market with an accurate understanding of the Company’s financial condition and prospects and an appropriate and transparent assessment of Medallion Bank and its other assets. ”
Medallion went on to describe the SEC accusations as a misinterpretation of the company’s âgood faith effortsâ.
“None of the allegations in the SEC complaint give rise to a securities violation, and we are confident that the complete file will show that Medallion Financial Corp. and Andrew Murstein have complied with the law,” the company added. .
As a quick reminder, New York City taxi medallions are usually a piece of metal that proves that a vehicle is legally capable of operating as a cab in the city. These medallions are regulated by the city government and are set at a certain amount (approximately 13,000 according to Investopedia) to avoid creating an oversupply of taxis. These medallions already in circulation can however be bought and sold on the private market. But this market price is often beyond the reach of almost all working class people who attempt to drive a cab, this is where loan companies like Medallion Financial come in, offering loans to drivers, sometimes with unmanageable fees and interest.
This process continued for a while, but as the New York Times of 2019 investigation detailed, taxi industry leaders began artificially inflating the value of medallions for years from the early 2000s, which drove prices beyond a million dollars. here 2013. which were held as collateral for the loans) and caused the value of Medalion’s shares to fall.
Before anyone sheds a tear for Medallion, it should be borne in mind the numerous, on time, horribly detailed the stories of New York taxi drivers who found themselves in debt because of those loans and the sudden shock the ridesharing business model had on the industry. These factors, and others, have collided to usher in a wave of driver suicides, some by expression, the most of despair.
The SEC accusation comes at a bad time for Medalion, who has tried to distance himself from the taxi industry. According to Bloomberg, Medallion said in its 2020 annual report that it plans to focus more on consumer loans. Prior to that, Medallion had would have started lending to RV buyers and even had purchase a professional lacrosse team.
Update 3:36 p.m. ET: Adding a statement by Medallion Financial Corp.