Loanranger,
One year ago I asked the exact same question after a little research. The Martin Act dates back to 1921 and is overly broad in its treatment of securities fraud. So I figured I would ask the Attorney General himself. So I filed the below complaint because I don't know if a law written in 1921 could be applied to todays interwebs and social media. But it seems the NYState Supreme Court thinks it should be applied liberally. So I quoted a recent decision in my complaint. Note how scienter and intent don't need to be established under the Martin Act and compare how narrow the same concepts are under Federal Law as argued in the Sullivan Rosen dockets. Anyway, I was contacted by the NYAG Investor Protection Bureau not long after to let me know They created an investigation file for this matter. So send in complaints and reference the file number I posted and let them figure out whether or not it can be applied.
Dear Mr. Schneiderman,
I am writing to you to request your help on behalf of myself and the investing general public. The rise of the fraudulent "Short and Distort" stock manipulation scheme where unethical internet investors who short-sell a stock and then spread unsubstantiated rumors and other kinds of unverified bad news in an attempt to drive down the equity's price and realize a profit has reached an epidemic level. A large proportion of these campaigns also involve frivolous federal class action lawsuits to further drive down the price of the affected stocks. This calls into question the integrity of the attorneys involved. The SEC has been either unwilling and or unable to address this systemic fraud.
Can you use the NY State Martin Act to address this fraud? On February 13, 2015, Justice Kornreich of the New York County Commercial division issued a decision in People v. Barclays Capital Inc., 2015 NY Slip Op. 25043, discussing the standard for a Martin Act claim. In it the judge stated
"The Martin Act—New York’s blue sky law—authorizes the Attorney General to investigate and enjoin fraudulent practices in the marketing of stocks, bonds and other securities within or from New York. The purpose of the Martin Act was to create a statutory mechanism in which the Attorney-General would have broad regulatory and remedial powers to prevent fraudulent securities practices by investigating and intervening at the first indication of possible securities fraud on the public and, thereafter, if appropriate, to commence civil or criminal prosecution.
The Martin Act is not a narrow statute. Rather, the Court of Appeals has long held that the Martin Act should be liberally construed to give effect to its remedial purpose of protecting the public from fraudulent exploitation in the offer and sale of securities. Moreover, though a cause of action under the Martin Act is a fraud claim, it is well settled that the Attorney General need not prove scienter or intent to defraud. Nor need reliance be proved."
Therefore it would seem that your office could best serve the investing public in addressing this form of finacial terrorism.
I am currently an investor in a small biotech company (Cellceutix) that trades on the OTC. It has recently come under such a "Short and Distort" attack and has lost more than half its value. Worse yet is the damage done to a company which may be serving the public good in its pursuit of novel medicines. The details of this fraud can be found in the frivolous Class Action Lawsuit defended by Michael J. Sullivan, former United States Attorney for the District of Massachusetts -
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
GARY ZAGAMI, Individually and on Behalf of all Others Similarly Situated,
Plaintiff,
v.
CELLCEUTIX CORPORATION, LEO EHRLICH, and KRISHNA MENON,
Defendants.
Case No. 1:15-cv-7194 (KPF)
Concerned investors in this matter have filed formal complaints with the NY State Supreme Court to investigate the attorneys involved for failing to follow the rules of the court in filing this frivolous lawsuit. Please help by having your office use the full force of the Martin Act to put an end to these frauds. Also, please let me know how to lodge a formal complaint in this matter with your office as the on-line complaint forms don't seem to cover this type of stock manipulation fraud.
