Taxi Medallion Loan Shark Duped Investors by Planting ‘Illegal’ Positive News Stories, SEC Says

It’s no secret at this level that Uber and Lyft’s arrival to the ride-hailing scene within the early 2010s dealt an enormous blow to the standard cab business, however expenses filed this week by the Securities and Exchange Commission (SEC) present simply how far one agency, New York’s Medallion Financial, was keen to go to remain related.

In its submitting, the SEC accused the corporate, and CEO Andrew Murstein, of partnering with a California media technique firm referred to as Ichabod’s Cranium to position fabricated optimistic tales in main publications utilizing faux identifies in a determined try to spice up the corporate’s inventory worth. Those tales allegedly discovered their means onto outstanding websites like The Huffington Post, In search ofAlpha, and TheRoad.com.

“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were really paid advertisements placed across the web in an effort to deceive investors about the value of Medallion’s stock,” SEC Director of the New York Regional Office Richard Best mentioned in a press release.

In addition to paying for articles, the SEC accused Medallion of pressuring funding banks to inflate Medallion Financial’s worth. “Companies also cannot shop for higher valuations when there is no evidence to support them,” Best added. Medallion’s inventory took a 56% nosedive in premarket buying and selling following information of the costs.

Both Murstein and Medallion are being charged with violating the antifraud, books and information, inside controls, and anti-touting provisions of the federal securities legal guidelines whereas Murstein can also be being charged with making false statements to Medallion’s auditor.

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Of course, that’s not how Medallion sees it. In a statement offered to Al Jazeera, Medallion denied that any of the SEC allegations amounted to securities fraud and mentioned it deliberate to “vigorously defend against the SEC’s unfounded charges.”

As a fast refresher, New York City taxi medallions are usually a chunk of steel that proves a car is legally in a position to function as a cab within the metropolis. Those medallions are regulated by town authorities and are mounted at a certain quantity (round 13,000 according to Investopedia) to keep away from creating an oversupply of cabs. Those medallions already in circulation although could be purchased and bought on the non-public market. But that market worth is commonly past the attain of virtually any working-class particular person trying to function a cab, which is the place lending companies like Medallion Financial are available, providing loans to drivers, typically with unmanageable charges and curiosity.

That course of sustained for a time, however as a 2019 New York Times investigation detailed, cab business leaders started artificially inflating medallion values for years beginning within the early 2000s, main costs to soar previous $1 million by 2013.) Making issues worse, Uber and Lyft’s arrival to New York quickly degraded the worth of NYC taxi cab medallions (which had been held as collateral for loans) and despatched Medalion’s inventory worth tumbling down.

Before anybody sheds a tear for Medallion although, it’s price making an allowance for the numerous, at instances, horrifically detailed accounts of New York cab drivers who discovered themselves drowning in debt on account of these loans and the sudden shock the ride-hailing enterprise mannequin had on the business. Those, and different elements, collided to usher in a spate of driver suicides, some out of protest, most from despair.

The SEC cost comes at a nasty time for Medalion, which has been trying to distance itself from the cab enterprise. According to Bloomberg, Medallion mentioned in its 2020 annual report that it’s planning to focus extra on client lending. Prior to that, Medallion had reportedly begun lending to R.V. consumers and had even gone forward with the purchase of knowledgeable lacrosse crew.