Following a guilty plea in a parallel criminal case, trading webcaster Mark Melnick today settled charges by the Securities and Exchange Commission that he engaged in a yearslong “pump-and-dump” scheme to manipulate the stock prices in large, publicly traded companies, according to a filing by the agency.
As part of the settlement, the SEC has barred Melnick, who lives in Marlboro, N.J., from association with “any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agent, or national recognized statistical rating organization,” stated the filing, adding Melnick is also barred from participating in offerings of penny stocks in any capacity.
Melnick could not be reached for comment by press time.
This filing follows a September 17 hearing in the Northern District of Georgia, where Melnick pleaded guilty to criminal charges of conspiracy to commit wire and securities fraud. Melnick will be sentenced in that matter on December 16 to a maximum prison term of five years, with no minimum. Of those, up to three years can be under supervised release. In addition, he will pay a fine of $250,000 and full restitution to all of his victims, as well as forfeit any and all proceeds from the offense, according to the plea agreement.
According to the original SEC complaint, Melnick was the host of a daily subscription-based, real-time trading webcast, T3 Newsbeat Live, where his title was director, trading psychology. T3 Live is an affiliate of registered broker-dealer T3 Trading Group LLC, with offices in New York. Between January 2018 and January 2020, Melnick conspired with other, separately charged defendants to disseminate false rumors about certain companies, information designed to buoy the companies’ stock prices in such a way that Melnick could profit, the complaint alleged.
In the scheme, Melnick would purchase short-term call options in these companies’ securities just before the spread of the false gossip, the complaint said. “Melnick assisted in the dissemination of the rumors by informing his webcast subscribers that there was ‘chatter’ about the subject companies,” the complaint said. His tips coincided with the spreading of the rumors, which created a false buzz among his own subscribers, financial news services, trading chat rooms and message boards, and often resulted in a brief increase in the stock prices.
“Melnick then sold his securities at prices inflated by the false rumors,” the complaint said. “Between January 2018 and January 2020, Melnick traded around the false rumors over 100 times, earning $374,835 in unlawful profits.”
Although the original complaint requested disgorgement of those profits, as well as prejudgement interest of $39,521.68, a civil monetary penalty to be determined later and a permanent bar from the industry, the settlement today noted that Melnick’s reapplication for association within the industry could be possible as long as he complied with the request for disgorgement and other penalties.