Arik Hesseldahl

Recent Posts by Arik Hesseldahl

So Where Did That Fake Google Acquisition Press Release Come From? Aruba?

So now we know that the press release concerning Google acquiring public Wi-FI firm ICOA Wireless was fake.

But what do we know about who sent the press release, and why?

The release was posted on PRWeb, a free low-cost service operated by the PR software firm Vocus, which, it just so happens, is publicly held on the Nasdaq. I have a call in to PRWeb seeking some answers, but so far haven’t heard back from anyone.

However, I just got this statement from ICOA CEO George Strouthopoulos: “We are investigating the source, so far it originated from Aruba!”

He also says that PRWeb staffers had promised to delete the release and retract the statements made in it. As of 1:45 pm ET, the press release has been removed.

Meanwhile, the situation bears all the markings of an attempt to “pump and dump” the shares of a thinly traded over-the-counter stock. Whoever sent the press release likely counted on it being propagated by journalists who wouldn’t bother to confirm whether it was true or not, so that traders would bid the price up. The shares trade at a price so low that they amount to fractions of a penny per share. Whatever the price, the shares tripled or quadrupled in value as the false news made its way around the Web.

Most who unquestioningly republished the release didn’t notice that it was missing some key elements. There were no quotations from senior executives at both companies, for one thing. These quotes are usually throwaway statements that reporters almost never use, but they are practically always present in a legitimate press release, especially one concerning an acquisition. There is also usually contact information for PR representatives for the companies involved.

There was no financial information saying exactly how shareholders of ICOA would be compensated. Also, ICOA’s market capitalization, according to Yahoo Finance, is less than $850,000, with an enterprise value of $3.15 million. If that press release were true, Google would have been paying a premium amounting to more than 470 times its most recent price, and 126 times its enterprise value.

There have been times when fake press releases intended to manipulate stock prices have led to jail time for the people who sent them. In 2000, a student at a California community college, who worked at Internet Wire, was convicted of wire fraud for sending a fake press release about the company Emulex, whose shares he had shorted.

The fake press release, sent from a computer at El Camino Community College in Torrance, Calif., said that the SEC was investigating Emulex, that its CEO had resigned and that the company would restate its earnings. In the course of 16 minutes, its share price went from $103.94 to $43.00, as 2.3 million shares changed hands. Emulex’s market capitalization fell by more than $2 billion.

The perpetrator, Mark S. Jakob, was sentenced to 44 months in prison in 2001. He had made $250,000 on his trades. As part of his sentence, he was also forced to disgorge his profits plus interest, which amounted to a total of $353,000, and to pay a civil penalty of $102,642.

A key fact in the Emulex case was that news organizations had republished the news release. Getting the word out to interested parties is a key moving part in the machinery of a stock-manipulation scheme. Traditionally, journalists don’t bear any responsibility for the losses or gains incurred by the mistakes they make, or the false news they repeat. But it’s not exactly stretching the argument to say that when they’re less than careful, in cases like this, they can become unwilling accomplices to a serious financial crime.


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