The brash boss of a New York City taxi medallion lender secretly paid for favorable news stories about his struggling company in a bid to boost its stock price, according to a Wednesday fraud complaint from the Securities and Exchange Commission.
Andrew Murstein, the 57-year-old president and chief operating officer of Manhattan-based Medallion Financial Corp., allegedly came up with the scheme as the rise of Uber and Lyft caused investors to sour on taxi-related stocks.
In a bid to change investors’ minds, the SEC says, Murstein hatched a plan: hiring media strategists to write articles boosting his company without disclosing that they were being paid by Murstein. The strategists then used fake names to place at least 50 articles about Medallion Financial on sites including Seeking Alpha, HuffPost and Crain’s New York Business from 2014 to 2017, according to the complaint.
“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 New York regional director Richard Best said.
Murstein also pressured accountants into giving Medallion Financial a higher valuation than it deserved, the SEC said.
Shares of Medallion Financial on Wednesday were recently off 27 percent at $6.21.
Murstein’s company, which went public in 1996 and helped revolutionize the taxi industry by making risky medallion loans to low-income drivers, saw its shares trade north of $17 as recently as 2013.
But as New Yorkers started flocking to Uber and Lyft, the value of medallions — which give holders the right to drive yellow cabs in the city — tanked. Investors then soured on Medallion Financial’s shares, sending them as low as $2 at one point in 2017.
In a statement to The Post, a spokesperson for Medallion Financial said the company plans to “vigorously defend against the SEC’s unfounded charges and are confident we will be completely vindicated.”
The spokesperson did not deny that Murstein secretly paid for articles but said the conduct was in “good faith.”
“The actions in question occurred five or more years ago at a time when short sellers were engaged in an online campaign to drive down the Company’s stock price for their personal profit by spreading misleading and disparaging information and misrepresenting its business,” the spokesperson said.
“Medallion sought only to provide the market with an accurate understanding of the Company’s financial position and prospects and an appropriate and transparent valuation of Medallion Bank and its other assets.”
“None of the allegations in the SEC complaint gives rise to a securities violation,” the spokesperson added.