The SEC’s Amended Complaint Against Medallion Financial and Andrew Murstein: Two Alleged Fraud Schemes

The SEC filed a federal lawsuit against Medallion Financial Corp. and Andrew Murstein alleging two fraudulent schemes. The first involved secretly paying people to post hundreds of promotional articles about Medallion stock online without disclosing they were being paid — illegal “touting.” When journalists exposed the scheme, the SEC alleged Mr. Murstein falsely denied knowledge of it and paid a promoter hush money to stay quiet. The second involved inflating the reported value of Medallion Bank by hundreds of millions of dollars, firing the independent valuation firm when it refused to certify his numbers and offering a replacement firm future investment banking work in exchange for the valuation he needed. The SEC alleged the result was that Medallion Financial’s balance sheet overstated its assets by more than $140 million and stockholders’ equity by more than $115 million.