In the Lemelson investigation, the SEC is examining commentaries about companies including Ligand Pharmaceuticals Inc., World Wrestling Entertainment Inc. and Skechers U.S.A. Inc., according to one of the people.
A report published on the financial markets website Seeking Alpha in June 2014 under the pseudonym Amvona said Ligand was in imminent risk of declaring bankruptcy and that demand for one of its drugs, Promacta, was rapidly declining. Within minutes, Ligand shares fell more than 7 percent. Since then, Promacta sales reached an all-time quarterly high and shares of the La Jolla, California-based company have increased 50 percent to $97.22 through yesterday.
The comments in the Seeking Alpha report on Ligand are attributed to Lemelson Capital, the name of Lemelson’s hedge- fund management company. The exact same report was also posted on Lemelson Capital’s website.
Historically, the SEC has had difficulty in bringing “short-and-distort” cases, since the regulator has to prove a misstatement of fact rather than opinion, according to Stephen Crimmins, a former SEC attorney who’s now with the firm Murphy & McGonigle. Wall Street executives famously complained that short-sellers were spreading false rumors about their banks during the 2008 financial crisis, but the allegations didn’t result in SEC enforcement actions.
The SEC has had more success suing “pump-and-dump” fraudsters, where scammers promote stocks with fake information to inflate prices and then sell out.