The U.S. Securities and Exchange Commission charged Medallion Financial and its chief operating officer with scheming to fraudulently inflate the stock price of the lender to taxicab medallion buyers, amid competition from ridesharing companies Uber (UBER) and Lyft (LYFT).
Shares of Medallion (MFIN) plunged 57% to $3.65 in premarket trading.
According to a complaint filed on Wednesday in Manhattan federal court, Medallion and COO Andrew Murstein paid a California media strategist to place positive stories about Medallion on various websites and create fake identities to make the opinion pieces appear credible to investors.
The SEC said Medallion and Murstein separately and fraudulently inflated the value of the company’s banking unit to offset losses from taxicab loans, and that Murstein fired a valuation firm when it refused to vet the scheme.
Medallion, Murstein and their lawyer did not immediately respond to requests for comment. A lawyer for the media strategist Ichabod’s Cranium Inc and its owner Lawrence Meyers did not immediately respond to a similar request.