In 2o16, if you mourned the death of Jackie Chan or felt incensed by Hillary Clinton engaging in child trafficking, you’ve been had.
Fake news, and not in the way our president uses the term, is a real scourge. The term entered the mainstream consciousness during and after the 2016 elections. But a recent action by Securities & Exchange Commission reveals that companies have engaged in creating and distributing fake news with the express purpose of swindling investors and long before 2016.
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The SEC cease-and-desist action involves a company named Galena Biopharma and its former CEO Mark Ahn, an Oregon resident. Per the document, the respondents – the company and Ahn – have offered to settle, but the details of the case show how the company and Ahn used commonly-used business sites like Seeking Alpha and others were used to drum up the company’ prospects.
The SEC order notes:
From January 2012 to February 2014, Galena and its then-CEO Mark Ahn engaged in a scheme to mislead investors by commissioning over 100 internet publications promoting Galena that purported to be independent and objective when, in fact, they were paid promotions funded by Galena. As CEO, Ahn, on behalf of Galena, engaged two firms, Lidingo Holdings and the DreamTeam Group, that paid writers to communicate about Galena on investment websites through articles and/or postings without disclosing that Galena had funded the communications. On over forty occasions, the writers affirmatively misrepresented that they were not receiving payment for their articles other than from the website on which their articles appeared. These omissions and misrepresentations about Galena’s funding of the articles and postings created the misleading impression that the opinions they contained were objective and independently formed. Some of the articles and postings that Galena funded constituted unlawful prospectuses transmitted while Galena was preparing to offer or offering securities.
Here’s the Seeking Alpha reference:
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For example, after Galena wired a $60,000 payment to Lidingo in November 2013 for three months of services, Lidingo paid a writer for an article describing Galena securities on Seeking Alpha’s website. The article failed to disclose the writer’s indirect compensation from Galena and contained the following misrepresentation: “I am not receiving compensation for [this article] (other than from Seeking Alpha).”
That article “Can Galena’s Post-Holiday Charm Continue?” could not be found in Seeking Alpha’s site anymore. Galen Biopharma’s website shows that the company is based in San Ramon, California and is developing drugs for the hematology and oncology markets.
A review of Galena’s historical stock data using the time period per the SEC document shows the effect of the positive articles.
For most of January 2012, when the SEC charges the scheme began, the stock hovered at less than $1. It steadily climbed through 2012 and reached a peak of $7 in January 2014 [SEC said that the fake news campaign began in January 2012 and continued until February 2014.
The stock of the company currently is at its pre-promotion levels – 58 cents.
Photo: Kagenmi, Getty Images
