Assets of Accused Stock Market Hoaxer Seized
Federal authorities seized about $400,000 in assets of accused stock market hoaxer Mark Simeon Jakob and scoured banks and brokerage firms Friday in a search for more of his stock market profits.
Authorities moved quickly to freeze his assets because, they said, the 23-year-old college student appeared anxious to liquidate his brokerage accounts in the days after an audacious stock market scam rocked Wall Street on Aug. 25.
The hoax, involving a phony news release, initially battered the stock of Emulex Corp., an Orange County tech firm.
Jakob, who remained incarcerated Friday at the Metropolitan Detention Center in downtown Los Angeles, is accused of manipulating Emulex stock in an effort to recoup losses from previous trades in the shares. Authorities say he netted $241,000 in profit with the hoax.
On Monday and Tuesday, Jakob pulled $71,184 from his accounts and tried to withdraw the remaining $406,767, Securities and Exchange Commission officials said.
But Jakob was unsuccessful in getting the remaining sum because authorities had contacted his brokerages as early as Aug. 25 to tell them Jakob was a suspect, and to put a hold on his accounts, said FBI Special Agent Matt McLaughlin.
SEC regulators said Friday that they are trying to find the withdrawn $71,184 and any other assets Jakob has.
“We can’t say at this point what exactly happened to that money,” said Sandra Harris, the SEC’s associate regional director for enforcement.
But by Friday, authorities had identified and seized about $400,000 in other assets, which they believe includes the $241,000 that Jakob is accused of making on Emulex trades.
SEC Regional Director Valerie Caproni described Jakob as a very aggressive “day” trader who often bought and sold large volumes of stock in a single session.
“Pretty amazing,” Caproni said of Jakob’s portfolio. “Almost a quarter of a million of it came from Emulex. And the rest, he was a day trader. He did a lot of trading.”
The assets were seized from Jakob’s accounts at three brokerages--Datek, Suretrade and J.B. Oxford--and from Washington Mutual bank.
Assistant U.S. Atty. Pamela Johnston said Jakob’s parents personally posted a $100,000 surety bond that was approved by her office. But Jakob won’t be released from prison until a psychologist gives him a mental evaluation and determines he isn’t a danger to himself or others in the community. That wasn’t expected to occur until after the weekend.
The FBI arrested Jakob early Thursday after an intense weeklong probe that began immediately after a phony news release sent Emulex shares plummeting 62% on Aug. 25.
Jakob, an El Camino Community College student, used his inside knowledge of how Internet financial news wires work to pull off the hoax, authorities allege.
Jakob did it, authorities say, by sending a fake news release to an Internet news service he had just quit, stating that Emulex was under investigation by the SEC, and that its chief executive had resigned.
The release went out on the Internet, and within minutes Emulex’s stock plunged.
The hoax was soon discovered and Emulex’s shares regained most of their value after a trading halt. But Jakob allegedly bought enough shares at bargain prices before the halt to more than cover his losses on previous trades, and net a total profit of $241,000, authorities allege.
“There were a lot of people who lost a lot of money because of one greedy, foolish young man,” Johnston said. “All signs appear to be that he did it for financial reasons.”
The SEC also filed a civil suit against Jakob, alleging securities fraud. Jakob’s assets were frozen by U.S. District Judge Virginia A. Phillips based on the SEC’s request.
Federal prosecutors said they were proceeding as well, one day after providing U.S. Magistrate Judge George Shwartz with information that led him to order the psychiatric evaluation. Prosecutors refused to say what that information was, citing Jakob’s right to privacy. But officials in the federal court’s pretrial services section, who interview people like Jakob after their arrest, described the order as unusual.
“It is rare,” said Wilhelmina Jones, supervising U.S. Pretrial Services officer. “ It is not something that is routine, I can tell you that.”
A federal public defender representing Jakob did not return calls seeking comment.
