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Wednesday, July 6, 2022
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Former Majority Owner of Richard Petty Motorsports Charged by SEC For Fraudulent Schemes to Boost Stock Price

 

Erik Jones, driver of the #43 Medallion Bank Richard Petty Racing Chevrolet Camaro ZL1 1LE, races to a 19th place finish Sunday, July 18, 2021, during the NASCAR Cup Series Foxwoods Resort Casino 301 at New Hampshire Motor Speedway in Loudon, New Hampshire. (Photo by Andrew Coppley/HHP for Chevy Racing)

On Wednesday, the Securities and Exchange Commission announced that they have charged Medallion Financial Corporation and its President and Chief Operating Officer, Andrew Murstein with illegally engaging in two schemes in an effort to reverse the company’s plummeting stock price due to a rise in popularity of ride-sharing platforms such as Uber and Lyft.

Medallion Financial Corporation and Murstein were majority investors in Richard Petty Motorsports until earlier this month when GMS Racing purchased the majority stake in the race team from Medallion Financial Corporation.

The newly renamed Petty GMS Motorsports team stated to TobyChristie.com that they are aware of the SEC charges towards Medallion and Murstein but that the race team does not have a comment on the matter at this time.

According to a release from the SEC, Medallion’s core business (loans backed by taxicab medallions to taxicab owner and operators) being devalued caused the company and Murstein to allegedly direct two separate schemes in an effort to inflate their stock price.

Also according to the SEC release, Medallion allegedly had help from California-based media strategy company, Ichabod’s Cranium Inc. and it’s owner Lawrence Meyers. Both Ichabod’s Cranium and Lawrence Meyers have also been charged with fraud by the SEC.

According to a complaint filed in federal district court in Manhattan, it is alleged that Murstein and Medallion paid Ichabod’s Cranium to place positive stories, which were to appear to be legitimate opinion pieces by fake personas in an effort for the stories to appear credible to potential investors, about the company on various websites, including Huffington Post, Seeking Alpha and TheStreet.com.

In all, the SEC says Murstein paid for more than 50 positive articles to be posted about his company.

Additionally, the complaint alleges that Medallion and Murstein fraudulently increased the carrying value of Medallion Bank, a wholly owned subsidiary of Medallion, to offset losses relating to the taxicab medallion loans. According to the complaint, Murstein allegedly pressured Medallion’s existing valuation firm to increase the Bank’s valuation, when the valuation firm didn’t do so, Murstein fired the firm and hired a new firm to provide an inflated valuation of the Bank.

“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were really paid advertisements placed across the web in an effort to deceive investors about the value of Medallion’s stock,” said Richard Best, Director of the New York Regional Office. “Companies also cannot shop for higher valuations when there is no evidence to support them.”

In total, the SEC complaint charges Murstein and Medallion with violating the antifraud, books and records, internal controls, and anti-touting provisions of the federal securities laws.

Murstein is also being charged with making false statements to Medallion’s auditor. The report states that Ichabod’s Cranium and Meyers have been charged with touting and fraud.

The SEC is seeking permanent injunctions, disgorgement plus prejudgment interest, and civil penalties. In addition, the SEC is seeking an officer-and-director bar against Murstein.

The official announcement of GMS buying out Medallion’s majority ownership of what was once Richard Petty Motorsports came on December 7th. The team will be known as Petty GMS Motorsports in 2022 and the team will field two chartered entries during the NASCAR Cup Series season.

Erik Jones will return to the team’s No. 43 entry, while Ty Dillon will drive the No. 42, which will utilize the charter, which had been at Rick Ware Racing through a partnership between Petty and Ware the last few years.

Toby Christie
Toby Christiehttps://tobychristie.com
Toby is the Founder, and Editor-in-Chief of TobyChristie.com. Toby is also the co-host of The Final Lap Weekly Podcast. Additionally, he is a NMPA (National Motorsports Press Association) award-winning writer, and has followed the sport as a fan since 1993.

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