PairGain Hoax Suspect Pleads Guilty

A North Carolina man pleaded guilty Monday to perpetrating one of the largest online securities hoaxes ever--against Tustin-based PairGain Technologies Inc.

Gary Dale Hoke, 25, admitted issuing on the Internet last April a fraudulent news release, made to look like a page from the Web site of financial information service Bloomberg News, announcing that an Israeli firm was acquiring PairGain. He then used several fake identities to post messages on several Internet stock-related bulletin boards alerting people to the false release.

Hoke said, however, that he did not profit from the hoax.

He bought into PairGain stock after he was hired as an engineer more than two years ago, said Christopher Painter, an assistant U.S. attorney. Hoke did not sell any stock even after the hoax succeeded in boosting PairGain shares.

“Things got set in motion and he got cold feet,” Painter said.

Hoke is scheduled to be sentenced Aug. 30. Under federal sentencing guidelines, he would receive 10 to 16 months in federal prison, although those guidelines are not binding.

Because of the hoax, PairGain stock rose more than 30% in a matter of hours, from $8.50 a share to as high as $11.25, then retreated later in the session after the hoax was uncovered.

Ironically, PairGain has been trading at even higher levels lately. The stock closed Monday at $11.75, up 50 cents a share.

Hoke’s attorney did not return phone calls.