Teen still profited after SEC fraud fine

Associated Press

CEDAR GROVE, N.J. — The teen-age trader who paid $285,000 to settle stock manipulation charges didn’t come away empty-handed: He kept about a half-million dollars in profit.

The Securities and Exchange Commission last month brought civil fraud charges against Jonathan G. Lebed, claiming he made his money through a "pump and dump" scheme. Lebed, now 16, bought large blocks of nine low-priced stocks, hyped them on Internet financial message boards, and, within 24 hours, sold his shares after the price rose. He used this method twice with two stocks.

The trades were made between Aug. 23, 1999, and Feb. 4, 2000.

Lebed agreed to pay back $285,000 without admitting or denying the allegations to settle SEC charges related to 11 trades.

But, according to "60 Minutes," he actually made about $800,000 from 16 trades not involved in the SEC charges.

Lebed spent some of the profits on a $42,000 Mercedes-Benz sport utility vehicle for his family, his mother said.

SEC regulators told The Wall Street Journal that they alleged wrongdoing only in the cases for which they had abundant evidence.

"We charged violations with clear instances of fraud," SEC enforcement chief Richard Walker said.

Lebed’s attorney, Kevin Marino, said the SEC had wanted to recover his client’s total earnings, but settled on the "somewhat arbitrary" figure.

In an interview with "60 Minutes," Lebed said he sees nothing wrong with what he did.

"I wasn’t posting any kind of false information. I didn’t make up any facts or do anything like that," Lebed said on the show, which will air Sunday.

SEC Chairman Arthur Levitt said Lebed made more than 200 postings on individual securities. "And that represents, in my view, a wholesale effort at deceiving many investors," Levitt said.

Marino said most of the Internet postings included a disclaimer, "Be sure to take the time to do your research."

The SEC found that Lebed sent e-mail messages under fictitious names. One claimed a company trading at $2 per share would be trading at more than $20 per share "very soon." Other postings claimed a stock would be the "next stock to gain 1,000 percent."

"Well, I’m not aware of one investor that exists that I cheated," said Lebed, a junior at Cedar Grove High School. "And I don’t think the SEC is aware of one investor that exists that I cheated."

Marino, who has declined to make the boy available for an interview with The Associated Press, did not return a message left Thursday, when "60 Minutes" released a transcript of the segment.

Lebed has said he has been fascinated by finance since he was 11 years old. In the eighth grade, he and two friends were among the finalists in CNBC’s stock-picking contest. Lebed eventually traded in custodial accounts in his father’s name at two brokers, the SEC said.

On the CBS show, Marino admitted "there was some manipulation," but argued there is little difference "between what he did and what is done every single day of the week on Wall Street. That is, he touted various stocks. And he sold them after the prices went up."

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

A big decision for Boeing’s next CEO: Is it time for a new plane?

As Boeing faces increased competition from Airbus, the company is expected to appoint a new CEO by the end of the year.

A Mukilteo Speedway sign hangs at an intersection along the road in Mukilteo. (Ryan Berry / The Herald)
Mukilteo Speedway name change is off to a bumpy start

The city’s initial crack at renaming the main drag got over 1,500 responses. Most want to keep the name.

Two workers walk past a train following a press event at the Lynnwood City Center Link Station on Friday, June 7, 2024, in Lynnwood, Washington. (Ryan Berry / The Herald)
Trains up and running on Lynnwood Link — but no passengers quite yet

Officials held an event at the Lynnwood station announcing the start of “pre-revenue” service. Passengers still have to wait till August.

Nedra Vranish, left, and Karen Thordarson, right browse colorful glass flowers at Fuse4U during Sorticulture on Friday, June 7, 2024, in Everett, Washington. (Olivia Vanni / The Herald)
A promenade through Everett’s popular Sorticulture garden festival

Check out a gallery of the festival’s first day.

Left to right, Everett Pride board members Ashley Turner, Bryce Laake, and Kevin Daniels pose for a photo at South Fork Bakery in Everett, Washington on Sunday, May 26, 2024. (Annie Barker / The Herald)
Second Everett Pride aims for even bigger rainbow of festivities

Organizers estimated about 3,000 people attended the first block party in Everett. This year, they’re aiming for 10,000.

A house fire seriously injured two people Friday evening, June 14, in Edmonds, Washington. (Courtesy of South County Fire.)
1 killed, 1 with life-threatening injuries in Edmonds house fire

South County Fire crews pulled the man and woman from the burning home around 6 p.m. Friday, near 224th Street SW and 72nd Place W.

Melinda Grenier serves patrons at her coffee truck called Hay Girl Coffee during the third annual Arlington Pride event in Arlington, Washington on Sunday, June 2, 2024. (Annie Barker / The Herald)
Hidden costs, delays crush hopeful food truck owners in Snohomish County

Melinda Grenier followed her dream to open Hay Girl Coffee. Thousands in fees later, it has cost her more than she bargained for.

The I-5, Highway 529 and the BNSF railroad bridges cross over Union Slough as the main roadways for north and southbound traffic between Everett and Marysville. (Olivia Vanni / The Herald)
Highway 529 squeeze starts now between Everett, Marysville

Following a full closure for a night, starting late Sunday, Highway 529 will slim down to two lanes for months near the Snohomish River Bridge.

New Jersey auto group purchases Lynnwood Lexus dealership land

Holman, which owns Lexus of Seattle in Lynnwood, bought property on which the dealership resides.

Marvin Arellano (Photo provided)
Family: ‘Manic episode’ preceded trooper shooting man on I-5 near Everett

“It’s very, very unfortunate how he was portrayed in his final moments,” Gilbert Arellano said. “He was just such a good person.”

Two visitors comb the beach at Kayak Point Regional County Park on Friday, June 14, 2024, in Tulalip, Washington. (Ryan Berry / The Herald)
Kayak Point reopens ahead of schedule

The county’s most popular park reopened Friday.

Grauates throw their caps in the air at the end of Arlington High School graduation at Angel of the Winds Arena on Thursday, June 13, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
‘So worth it’: Snohomish County graduates step into their futures

Alyssa Acosta, who is Harvard-bound, was one of thousands to walk the stage at Angel of the Winds Arena this month to get high school diplomas.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.