Emulex hoax
Encyclopedia
The Emulex hoax, an instance of securities fraud
, was a false 2000-08-24 press release claiming to be from Emulex Corporation. The release falsely claimed that the company's CEO was stepping down, that previously stated quarterly earnings were being revised downward, and that the company was under investigation by the U.S. Securities and Exchange Commission.
The next morning, on 2000-08-25, the false release was picked up by Bloomberg Television
and other news outlets. Emulex's stock price dropped from $103.94 to $43.00 (a 62% drop) in 16 minutes of morning trading, losing $2.2 billion in market capitalization
, before Nasdaq
halted trading on the stock.
It was soon learned that the press release was a fraudulent short and distort
stock manipulation. However, the discovery was not instantaneous, because Emulex is headquartered in California, three hours behind the east coast. The US stock markets opened at 9:30 AM Eastern time, which was 6:30 AM in California, and no one was at the Emulex office to field calls from the press.
The fraudulent press release came from a press service named Internet Wire
. The FBI
traced the story to former Internet Wire employee Mark Jakob, who had profited over $250,000 by shorting
the stock. Jakob was sentenced to 44 months in prison, forfeiting the gains and owing an additional $103,000 in penalties. Internet Wire is now known as Marketwire
.
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, was a false 2000-08-24 press release claiming to be from Emulex Corporation. The release falsely claimed that the company's CEO was stepping down, that previously stated quarterly earnings were being revised downward, and that the company was under investigation by the U.S. Securities and Exchange Commission.
The next morning, on 2000-08-25, the false release was picked up by Bloomberg Television
Bloomberg Television
Bloomberg Television is a 24-hour global network broadcasting business and financial news. It is distributed globally, reaching over 200 million homes worldwide. It is owned and operated by Bloomberg L.P...
and other news outlets. Emulex's stock price dropped from $103.94 to $43.00 (a 62% drop) in 16 minutes of morning trading, losing $2.2 billion in market capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
, before Nasdaq
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
halted trading on the stock.
It was soon learned that the press release was a fraudulent short and distort
Short and distort
"Short and distort" is a type of securities fraud in which Internet investors short sell a stock and then spread negative rumors about the company in an attempt to drive down stock prices...
stock manipulation. However, the discovery was not instantaneous, because Emulex is headquartered in California, three hours behind the east coast. The US stock markets opened at 9:30 AM Eastern time, which was 6:30 AM in California, and no one was at the Emulex office to field calls from the press.
The fraudulent press release came from a press service named Internet Wire
Marketwire
Marketwire is a full-service newswire and communications workflow solutions company headquartered in Toronto, Canada with offices throughout Canada, the United States, South America, and Asia. Marketwire was founded in 1993 and incorporated in the U.S in 1999...
. The FBI
Federal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
traced the story to former Internet Wire employee Mark Jakob, who had profited over $250,000 by shorting
Short selling
In finance, short selling is the practice of selling assets, usually securities, that have been borrowed from a third party with the intention of buying identical assets back at a later date to return to that third party...
the stock. Jakob was sentenced to 44 months in prison, forfeiting the gains and owing an additional $103,000 in penalties. Internet Wire is now known as Marketwire
Marketwire
Marketwire is a full-service newswire and communications workflow solutions company headquartered in Toronto, Canada with offices throughout Canada, the United States, South America, and Asia. Marketwire was founded in 1993 and incorporated in the U.S in 1999...
.