In today's world of social networking, Facebook and Twitter have taken the lead and are usually praised for their innovative ways of mass communication. But, now we have our first documented abuse where they have been used to commit stock fraud by several individuals. It is logical that scofflaws will attempt to use Social Equity to circumvent laws and manipulate the public the way sleazy stock promoters do today.
We contemplate the day where distribution of Public Company Press Releases are counted in their Social Media Website delivery mechanism - essentially eliminating the current press release model, but clearly - this kind of negative media - and abuse by promoters will delay this effort. This writer sees Social Media as the most important tool for public companies and hopes regulators develop systemic tools to uncover fraud so companies can get their messages out to shareholders and potential shareholders.
Facebook and Twitter social networking sites were used to tout stocks in a classic "pump and dump" fraud of about $7 million that was uncovered during a cocaine-trafficking probe, U.S. prosecutors said on Tuesday. Investigators discovered the fraud in a two-year probe of suspected trafficking by longshoremen and others of 1.3 tons of cocaine worth $34 million through the Port of New York and New Jersey officials said.
A statement by the Manhattan U.S. Attorney's office said 11 out of 22 people charged used more than 15 web sites, Facebook pages, and Twitter "feeds" to "defraud the investing public into purchasing stocks that were being manipulated by participants in the conspiracy." A spokeswoman for Twitter declined to comment on the announcement. A spokesman for Facebook declined to comment.
Eight longshoremen and three others face narcotics trafficking charges. Eleven people, including one longshoreman, face charges of conspiracy to commit wire fraud in the purported stocks scheme. Documents filed in Manhattan federal court said the 11 were from New York, Florida and Pennsylvania. They are accused of orchestrating web site links that touted picks in four penny stocks said to be based on the authors' expertise and independent research. They face up to 20 years in prison if convicted.
None of the stocks were identified in court documents, which said more than $3 million was accrued in illegal gains by the accused and that shareholder losses amounted to more than $7 million.
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