N.C. Man Pleads Guilty in Online Securities Hoax

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 to issuing on the Internet in April a fraudulent news release made to look like a page from financial information service Bloomberg News’ Web site alleging 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 releases.

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 the federal sentencing guidelines, he would receive between 10 and 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.