US agency settles alleged online stock scam

In what may be the first case of its kind, the Department of Corporations, California's securities regulator, has settled a civil case against a local man accused of using the internet to manipulate the stock market.

The regulator claimed that Victor Idrovo posted "false or misleading" messages on an online message board with the intention of affecting the offer, purchase and sale of stock from US media giant Metro-Goldwyn-Mayer (MGM).

Idrovo agreed to the injunction and penalties, which included a retraction and the payment of costs, but neither admitted nor denied the allegations.

He is alleged to have posted the messages on Yahoo's finance message board using the screen name 'frankgmancuso' - clearly intending it to be seen as coming from Frank G Mancuso, MGM's former chairman and chief executive, who continues to act as a consultant for the company.

In April, 'frankgmancuso' posted another message, this time supposedly from Kirk Kerkorian, MGM's majority shareholder. It said: "This bad boy is heading north. See you at 22 by the end of the month, if not sooner." The figure refers to the price of MGM's stock which was lower at the time.

In October, a message with the headline "Let the selling begin", read: "Down over two today and the rites [sic] have not even been issued. If you wait much longer you will lose any amount you might have made with the rites [sic]."

According to G W McDonald, the regulator's enforcement director, the case was significant because most fraud of this kind involves thinly traded stocks, but this case involved a major corporation with millions of shareholders.

"Clearly Idrovo was active in trading MGM stock and clearly he was trying to manipulate the price. Whether he did manipulate it, we can't tell," said McDonald.

He added that, despite successes in cases such as this one, he expects the need for his agency's efforts to grow. "Right now, most people using the internet have a good idea about the validity of the information out there, but as the internet demographics change there will be more vulnerable people online. The internet is going to be the marketing tool of choice for con artists for a long time and because it reaches large numbers of people, the scams are huge," he said.