NYC taxi lender fined $4M over 'fake news' plants

New York Post

a day ago

A New York financier and his publicly traded firm that bankrolled loans to taxi drivers were fined $4 million for planting fake news articles online to boost the company's stock price.
Medallion Financial Corp. — which got hit a decade ago as ride-sharing apps like Uber and Lyft began to tank the value of taxi medallions — will have to pay $3 million as part of a settlement after a ruling by Judge Lewis A. Kaplan of the US Southern District of New York.
Medallion president Andrew Murstein — who made headlines when he hired Nicki Minaj to perform at his son's bar mitzvah in 2015 — must fork out over $1 million in a ruling on a case brought by the Securities and Exchange Commission, according to a May 29 securities filing.
5 Medallion president Andrew Murstein, seen here at a Yankees game, has been hit with a $1 million fine.
Anthony J. Causi
The SEC complaint, brought in December 2021 under the agency's President Biden-appointed chair Gary Gensler, contained 'more than sufficient allegations to support the claim that Murstein and Medallion Financial misled investors by withholding information material to Medallion Bank's fair value,' Kaplan wrote in a separate filing.
The Post previously reported on Murstein's brazen scheme to secretly pay for 'fake news' stories as the rise of Uber and Lyft caused investors to sour on taxi-related stocks, leaving Medallion's share price floundering.
Judge Kaplan ruled that securities laws were broken when the top executive hired media strategists to place at least 50 stories from 2014 to 2017 on sites such as HuffPost and Crain's New York Business.
The taxi medallion lender also failed to disclose that the authors of the bogus blogs were being paid, and that many of the stories had been personally tweaked and edited by Murstein.
Instead, the posts were written in a way to make it look as if they had been penned by actual investors who were bullish on Medallion stock.
5 Prices for a prized medallion soared to as much as $1 million under Mayor Michael Bloomberg before crashing when ride-sharing apps such as Uber and Lyft cornered the market.
NY Post
'Neither Medallion Financial nor Murstein ever disclosed to investors Murstein's conduct in recruiting, paying, and instructing his touters,' Kaplan wrote..
'Murstein acted knowingly or recklessly in hiring and keeping touters on the Medallion Financial payroll.'
The judge found he had gone 'opinion-shopping' when one valuation firm refused to ignore his deteriorating medallion portfolio and accept his inflated view of the company's actual worth of $193 million.
It resulted in the value of Medallion's banking unit jumping to $280 million at the end of 2016, from $166 million just two quarters earlier, even as the price of medallions slumped.
California PR agent Lawrence Meyers, one of the main communications specialists hired by Murstein, must also pay a $100,000 fine, according to SEC filings.
As part of the settlement deal, all defendants neither admit nor deny the allegations, the ruling said.
'Our agreement with the SEC puts this nearly decade-old matter behind us and enables us to apply our full focus to continuing to grow the company,' a Medallion spokesperson told The Post on Wednesday.
'It removes the distraction, cost, and uncertainty of continued litigation and is in the best interest of the Company and our shareholders.'
5 Murstein splashed the cash on getting Nicki Minaj to perform at his son's bar mitzvah in 2015.
Evan Agostini/Invision/AP
News of the settlement was first reported by American Banker on Tuesday.
The brash boss and his father, Leon, raked in more than $42 million from 2002 to 2014, according to the New York Times.
Aside from spending lavishly on the 'WAP' singer, Medallion Financial bought up professional lacrosse and NASCAR teams, the paper reported.
'One wonders if the SEC is going easy on them a bit, due to the change in administration or lack of staff,' a source close to the situation told The Post.
'That should give investors pause for thought if boards and executives can get away with such behavior.'
President Trump-nominated SEC Chair Paul Atkins replaced Gensler.
Rebecca Fike, a partner at Vinson & Elkins and a former SEC enforcement attorney, added that it shows 'a desire to wrap up actions that were initiated under the previous administration.'
'I expect the Atkins SEC to favor quicker resolutions and accept much lower civil penalties, particularly where the staff cannot show a corporate benefit from the fraudulent acts,' she told The Post.
5 Medallion made a mint offering loans to low-income drivers who wanted to get a permit to drive NYC's iconic yellow cabs.
Christopher Sadowski
The company's stock closed Wednesday at $9.50.
By law, there are only 13,587 taxi medallions in New York City, and each yellow cab must have a medallion linked to it. Prices for a prized medallion soared to as much as $1 million under Mayor Michael Bloomberg.
But they plunged under tougher competition from the ride-sharing apps, leaving the drivers drowning in debt and piling the pressure on Medallion's profit margins.
Medallion went public in 1996. The company had been originally set up by Murstein's taxi-driving father, a Polish immigrant, who started trading some of the cab medallions.
5 The case against Medallion was first brought in December 2021 under Gary Gensler, who was Joe Biden's pick to be chair of the Securities and Exchange Commission.
REUTERS
A driver would put up roughly a third of the purchase price when buying the permit, with Medallion financing the rest with interest over a fixed period of time.
After years of protests from drivers amid the rise of digital rivals, former New York Mayor Bill de Blasio unveiled a deal in November 2021 to cap medallion loans at $170,000 and interest repayments at 5%.
Medallion has since tried to shift to more traditional consumer and commercial banking over the past few years.