Sunday, February 5, 2023

SEC Files Charges Against Firms That Paid Online Reporters for Content

SEC Files Charges Against Firms That Paid Online Reporters for Content

The SEC yesterday filed 27 charges against a number of companies and individuals for secretly enlisting PR firms and writers to shill their stocks on major investment websites.

Also read: 270,000 Customer Financial Records May Be at Risk After Hack

Over 250 articles were published on sites such as Seeking Alpha, Motley Fool and Forbes, where investors were led to believe the bullish articles were “independent, unbiased analyses” when they were actually part of a deceptive stock pump strategy.

SEC: PR Firms Paid Writers for Positive Articles

pump and dump scamAccording to the SEC, the fraud involved publicly listed companies looking to create a buzz around their stock. They would hire a PR firm for the task, who would then hire individual writers to create positive articles for publication.

The individuals charged included two CEOs, six employees and nine writers. The SEC determined that the writers’ content failed to disclose either direct or indirect payment. Additionally, they had often used multiple psuedonyms and false credentials to promote the same stock. In one case a writer used nine pseudonyms and promoted himself as an analyst “with over 20 years experience”.

While no direct blame seems to lie with the sites that publish the content, common sense would dictate that a modicum of oversight and research should occur.

Bitcoin Industry Has Heard Similar Rumors

The scam is one many bitcoiners can relate to. While many have built up a tolerance against perceived shilling, this practice is certainly not unheard of in the cryptocurrency space.

There have been persistent rumors that some cryptocurrency websites have accepted “cash for comment”, where companies and development teams looking to gain a foothold in the lucrative market pay to have their content promoted.

One of the most persistent rumors concerned the 2014 GAW Miners/Paycoin scam, perpetrated by Josh Garza, that was advertised and written about across multiple sites.

The SEC believes the practice to be so widespread in mainstream investing that it issued an investor alert in order to remind the general public not to believe everything it reads on the internet.

Melissa Hodgman, Associate Director of the SEC’s Division of Enforcement said:

“Our markets cannot operate fairly when there are deliberate efforts to reach prospective investors with positive articles about a stock while hiding that the companies paid for those articles”

The more cynical among us would point her to most mainstream finance programs, or perhaps the infamous Jim Cramer “Don’t Be Silly” call on Bear Stearns at the height of the 2008 liquidity crisis, as examples of bullish sentiment being the default mainstream setting.

Media Outlets Battle in Tough Market

Perhaps though, this event serves to highlight the difficulties many websites face in the current media climate, where the fight between revenue, eyeballs and accurate content is perhaps the biggest media issue of our times.

The recent US election revealed that many major media outlets operate as virtual mouthpieces for the government, lest they be denied access to government officials. The exposure of this relationship, via Wikileaks DNC and Podesta email dumps, was a widely debated election topic.

For many, the whole event merely confirms the sentiment of disdain the public holds for the mainstream media.

How do you know who to trust, and who to filter? Tell us what you think in the comments.

Images via Pixabay

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