Emulex hoax
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On August 25, 2000, a press release reported that Emulex Corporation's earnings dropped, its CEO was stepping down, and that it was under investigation by the U.S. Securities and Exchange Commission. The stock immediately lost 62% of its value during morning trading, losing $2.2 billion in capitalization as Bloomberg Television and Business Wire reported the bad news.
It was soon learned that the press release was fraudulent, an example of pump-n-dump stock manipulation. However, the discovery was not instantaneous, because Emulex is headquartered in California, which is three hours behind the east coast. The US Stock Market opened at 9:30 AM, which was 6:30 AM in California, and no one was at the office to field calls from the press.
The fraudulent press release came from a press service named Internet Wire. While this service issued press releases for many companies, Emulex had not previously used this service. The FBI stepped in and traced the story in turn to former Internet Wire employee Mark Jakob, who had profited over $250,000 by shorting the stock. Jakob was sentenced to 44 months in prison, forfeiting the gains (plus interest) and owing an additional $103,000 in penalties. Internet Wire is now known as Market Wire.
