Larry Neumeister
Bloomberg, the global financial news service, has filed a lawsuit against the unidentified people who posted and promoted a bogus report last week on the Internet that boosted the value of a California company’s stock 31% before the hoax was exposed.
The lawsuit will help Bloomberg learn the real identities behind the screen names of those who joined the scheme, said Richard Klein, a Bloomberg lawyer.
The lawsuit sought unspecified damages and a court order to prevent the defendants from engaging in counterfeiting again. The defendants were listed as John Does, No 1 through No 5.
Someone copied the Bloomberg page design and created a false news story that caused the dramatic increase in the trading value of PairGain Technologies, maker of telecommunications equipment.
The report said PairGain would be acquired by an Israeli firm, ECI Telecom, for $1,35-billion, or about twice its market value at the time.
During the day, the value of PairGain stock rose as high as $11,12 from a closing price the day earlier of $8,50. After company officials disputed the report and the page was pulled from the Internet, the stock dropped to $9,37 on trading volume of 13,7- million shares, nearly seven times its usual volume of about two million shares.
Klein said Bloomberg does not know the identities or screen names of those who caused the bogus story to appear on Angelfire.com. “We’ve issued subpoenas to the companies that sponsor the website where this phony story was posted,” he added.
PairGain and Bloomberg officials said they had turned the matter over to the United States Securities and Exchange Commission.