SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17294 / January 3, 2002
SECURITIES AND EXCHANGE COMMISSION v. NED C. SNEIDERMAN, United States District Court for the Northern District of California, Civil Action No. C-02-0001
SEC CHARGES INTERNET MESSAGE BOARD POSTER WITH FRAUD
The Securities and Exchange Commission today announced fraud charges against a 24-year-old man for posting a phony press release on the Internet announcing that Extreme Networks, Inc. ("Extreme Networks"), a Santa Clara technology company, was acquiring Viasource Communications, Inc. ("Viasource"), a small Florida technology company. The phony news caused Viasource's stock price and volume to spike until the companies denied that an acquisition was planned.
In its complaint, the Commission alleges that on October 8, 2001, Ned C. Sneiderman, of Louisville, Kentucky, posted a fake press release on a Yahoo Finance message board, which announced a cash tender offer by Extreme Networks for the shares of Viasource. In the hour following the posting, Viasource stock doubled in price to $.22 per share, on volume of more than 950,000 shares, nearly seven times higher than the previous trading day. The fraud artificially inflated Viasource's market capitalization by almost $4.7 million.
The complaint also alleges that Sneiderman purchased shares of Viasource stock minutes before he posted the false press release. However, within an hour after the false posting, Extreme Networks and Viasource denied the existence of a tender offer, and trading in both stocks was halted temporarily, which prevented Sneiderman from realizing substantial profits from the fraud. Both companies issued corrective press releases and, once trading was resumed, the price of Viasource shares dropped by almost 50% from the day's high.
The Commission's complaint charges that Sneiderman committed securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks a permanent injunction against future violations and a monetary penalty from Sneiderman.