Emulex hoax

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The Emulex hoax, an instance of securities fraud, was a false 2000-08-24 press release claiming to be from Emulex Corporation. The release falsely claimed that the company's CEO was stepping down, that previously stated quarterly earnings were being revised downward, and that the company was under investigation by the U.S. Securities and Exchange Commission.[1]

The next morning, on 2000-08-25, the false release was picked up by Bloomberg Television and other news outlets. Emulex's stock price dropped from $103.94 to $43.00 (a 62% drop) in 16 minutes of morning trading, losing $2.2 billion in market capitalization, before Nasdaq halted trading on the stock.[1]

It was soon learned that the press release was a fraudulent short and distort stock manipulation. However, the discovery was not instantaneous, because Emulex is headquartered in California, three hours behind the east coast. The US stock markets opened at 9:30 AM Eastern time, which was 6:30 AM in California, and no one was at the Emulex office to field calls from the press.[citation needed]

The fraudulent press release came from a press service named Internet Wire. The FBI traced the story to former Internet Wire employee Mark Jakob, who had profited over $250,000 by shorting the stock. Jakob was sentenced to 44 months in prison, forfeiting the gains and owing an additional $103,000 in penalties. Internet Wire is now known as Marketwire.

References[edit]

  1. ^ a b "Defendant in Emulex Hoax Sentenced": Securities and Exchange Commission, Litigation Release No. 17094, August 8, 2001.