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.
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.
Hundreds of articles published on top financial news sites were authored by individuals being paid to promote certain biotech stocks, according to enforcement actions announced today by the U.S. Securities and Exchange Commission. Such payments were not disclosed to readers, nor apparently to the sites themselves.
The charges: The SEC alleges that 27 individuals and entities “posted bullish articles about [publicly-traded] companies on the Internet under the guise of impartiality when in reality they were nothing more than paid advertisements.” So far the SEC has settled with 17 of those charged ? with disgorgement and penalties ranging from $2,200 to nearly $3 million ? while it remains in litigation with the other 10.