A former corporate executive turned activist investor has pled guilty in connection with an alleged pump-and-dump scheme that involved floating a phony offer to buy media company Getty Images Holdings Inc. to boost the stock’s price.
In parallel civil and criminal proceedings, the U.S. attorney’s office for the district of Massachusetts and the U.S. Securities and Exchange Commission (SEC) charged activist investor Robert Scott Murray for an alleged market manipulation scheme.
According to the SEC’s complaint, Murray and his company, Trillium Capital LLC, issued press releases advocating for changes at the company and seeking a board seat. Trillium had previously built up a position in Getty Images stock.
When those efforts had little effect on the stock price, the SEC alleged Trillium issued a press release announcing a planned offer to buy all of the company’s outstanding stock for US$10 per share, which was almost double its trading price at the time.
However, the SEC alleged the offer wasn’t legitimate.
“The proposed transaction would have required nearly $4 billion in cash to pay shareholders alone. But Murray knew, or was reckless or negligent in not knowing, that neither Trillium nor Murray had anywhere close to $4 billion,” the SEC’s complaint alleged.
The complaint said Murray’s portfolio was worth about US$13 million and that Trillium’s brokerage account had a balance of $17.32.
“Murray’s personal capital pool — even with Trillium’s $17.32 — was far too shallow to float a $4 billion transaction,” the complaint said. “Considering Murray and Trillium’s inadequate resources, the putative transaction would have required significant financing.”
The SEC alleged Murray never contacted an investment banker or advisor to seek financing. Instead, after the stock jumped in response to the purported offer, Murray liquidated his Getty Images stock, “without even waiting for Getty to respond to his announced offer.”
“Murray claimed that his buyout proposal could create real value for Getty shareholders. But we allege that, in the end, Murray leveraged his professional credentials to orchestrate an old-fashioned pump-and-dump scheme, disguised as shareholder activism,” said Mark Cave, associate director in the SEC’s enforcement division.
Murray and Trillium agreed to settle the SEC’s charges, consenting to a judgment that permanently enjoins them from future violations of federal securities laws, and bans Murray from serving as an officer or director of a public company. They also agreed the court will determine whether they will be required to pay disgorgement, penalties and prejudgment interest.
In the criminal case, Murray agreed to plead guilty to one count of securities fraud.