(Reuters) – The U.S. Securities and Exchange Commission on Monday announced a crackdown against alleged stock promotion schemes in which writers were secretly paid to post hundreds of bullish articles about public companies on financial websites.
Twenty-seven individuals and entities, including a Hollywood actress, were charged with misleading investors into believing they were reading "independent, unbiased analyses" on websites such as Seeking Alpha, Benzinga and Wall Street Cheat Sheet.
According to the SEC, many writers used pseudonyms such as Equity Options Guru, The Swiss Trader, Trading Maven and Wonderful Wizard to hype stocks.
450 Problem Articles Identified
The regulator said had it identified more than 450 problem articles, of which more than 250 falsely said the writers were not being paid.
"This is different from the fraud cases that you usually see us bring," Stephanie Avakian, acting director of the SEC enforcement division, said on the conference call.
"Here, we allege that the fraud was in presenting the analysis as impartial," she said. "It was bought and paid for."
Seventeen defendants including Galena Biopharma, ImmunoCellular Therapeutics and Lion Biotechnologies agreed to pay more than $4.8 million, including fines and restitution, to settle, and to refrain from further wrongdoing.
No Website Charged
Not all defendants were required to make payments, and Galena, ImmunoCellular and Lion did not admit wrongdoing. None of the websites was charged.
The SEC filed lawsuits against the other 10 defendants in Manhattan federal court.
These defendants include Lidingo Holdings, run by Kamilla Bjorlin, 46, an actress from Encino, Californiam who performs under the name Milla Bjorn; and CSIR Group, a New York firm overseen by Christine Petraglia, 49.
It is unclear whether those defendants have hired lawyers. A lawyer representing Lidingo and Bjorlin in separate litigation had no immediate comment. CSIR and Petraglia did not immediately respond to requests for comment.
The SEC also issued an alert warning investors that articles on investment research websites may not be objective and independent, and that they should never invest based solely on information published there.
Mike Taylor, a Seeking Alpha managing editor, said in an email that websites' policies "act as a strong deterrent against potential promotions," including documenting "all authors' claims to not having been compensated by third parties."