[jcfrei]

No, if Markopolos's allegations are correct then this is exactly how financial markets are supposed to work. They are about price discovery - the reward for this information integration is the profit that Markopolos and the Hedge Fund have made / are about to make. If these allegations prove to be baseless then they will receive a hefty fine by the SEC which I'm sure will at the very least take away any profits they've incurred.

[bduerst]

>If these allegations prove to be baseless then they will receive a hefty fine by the SEC which I'm sure will at the very least take away any profits they've incurred.

No they will not. There are no rules against exaggerating information about a company you don't operate. The SEC does not fine hyperbole as it's not covered by the exchange act.

[Jabbles]

Maybe.

The so-called short-and-distort scheme may violate the Securities Exchange Act anti-fraud provisions, as well as SEC Rule 10b-5, just like the better known antithetical "pump-and-dump" scheme. It checks all the boxes: (1) misrepresentation to the market (through articles, blogs and social media); (2) materiality (often including false statements about a company's financial condition or viability); (3) an intent to deceive (manipulating the market to create downward pressure on the share price to make a profit); and (4) connection to the purchase or sale of securities (initiating a selloff of securities to allow the short seller turned analyst to cover their short position). Likewise, this scheme may violate state securities and consumer protection statutes and common law.

https://www.dlapiper.com/en/us/insights/publications/2018/10...

[bduerst]

Has to be proven false first, and my guess is they're trying to push the whistle-blower safety laws to prevent it.

[jcfrei]

> There are no rules against exaggerating information about a company you don't operate.

I doubt that this reflects the regulatory complexity. "Everything is securities fraud" as Matt Levine often says.

[makomk]

When Matt Levine says that, he's talking about things done by the company itself and its employees and board members. Different set of rules.