Boy will pay $285,000 to settle SEC charges

Manipulating stock at 14 alleged in first case against a minor

Securities

September 21, 2000|By BLOOMBERG NEWS

WASHINGTON - A 15-year-old New Jersey boy agreed yesterday to pay $285,000 to settle regulators' charges that he manipulated stocks on the Internet.

The Securities and Exchange Commission said it is the first case it has brought against a minor.

Jonathan G. Lebed of Cedar Grove, N.J., used e-mail messages when he was 14 years old to tout nine small stocks he bought, the SEC alleged. He then sold all his holdings of these shares, usually within 24 hours of the e-mail, on 11 occasions between August 1999 and February 2000, the SEC said.

Lebed sometimes placed a "limit order" late in the day to sell the stock at a specified price so that he wouldn't miss an anticipated increase in the stock price while he was in school the next day, the SEC said.

The boy used many fictitious names for the 500 or so messages he posted on Yahoo! Finance message boards each time he touted a stock, the federal agency alleged.

Lebed neither admitted nor denied wrongdoing under the settlement.

"Mr. Lebed feels it's a fair settlement, and he and his family are happy to put the matter behind them," said the boy's attorney, Kevin Marino of Newark, N.J.

Lebed, a high school sophomore, placed the trades from a home computer, Marino said.

He's "an accomplished trader, very talented and very knowledgeable," who won an award in a national investing contest, the lawyer said. Lebed's parents "are fully informed of what's transpiring," Marino said. He declined to say whether they are disciplining him.

The SEC alleged that Lebed traded in custodial accounts that were in his father's name. He bought large blocks of thinly traded stocks, purchasing as much as 46 percent of the volume in a stock that day. After making a purchase, Lebed sent e-mail messages after the markets closed and again the next day before they opened, the SEC alleged. Some messages said that the stock was about to "take off," would be the "next stock to gain 1,000%," or was "the most undervalued stock ever," the agency contended.

Lebed then sold his entire position in a stock, making as much as $74,000 in profit per stock. Lebed made a total of $272,826 in profit after selling the stocks he touted, the SEC alleged.

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