Taxi drivers

NYC lender to taxi drivers sees shares plummet after SEC files lawsuit

Shares of Medallion Financial Corp. plunged on Wednesday after U.S. regulators accused the New York-based taxi driver lender of seeking to illegally boost its stock price amid intense competition from Uber and Lyft.

The Securities and Exchange Commission has alleged that after a string of record years, Medallion failed as the popularity of ride-sharing apps drove down the value of taxi medallions, which served as collateral for loans. As the company’s shares have slumped since 2013, it has tried to drown out short sellers by flooding media websites with fake news articles, the SEC said in a lawsuit filed in federal court.

Medallion shares were halted on Wednesday after the stock fell more than 50% to $3.94. They then resumed trading, closing down 21.07% at $6.67. The company was trading almost as high as $18 per share eight years ago.

The regulator said company chairman Andrew Murstein paid a public relations firm to produce hundreds of posts – often under pseudonyms – touting Medallion. Articles, designed to look like they came from actual investors who were bullish on the company, appeared on sites like Huffington Post, Seeking Alpha and

The regulator also accused Murstein of pressuring investment banks to inflate the valuation of the company’s Medallion Bank unit. The move, which was not disclosed to investors, boosted the subsidiary’s fair value to $280 million at the end of 2016 from $166 million two quarters earlier, even as the price of medallions was collapsing, the SEC said.

“Companies also cannot seek higher valuations when there is no evidence to support them,” Richard Best, director of the SEC’s New York regional office, said in a statement.

The SEC said it was filing a lawsuit to force the company to reimburse investors for alleged violations that occurred between 2014 and 2017. The regulator is also seeking to fine the company and bar Murstein from serving as a as an officer or director of a listed company for a certain period. of time.

“We intend to vigorously defend ourselves against the SEC’s baseless accusations,” Medallion said in a statement. “None of the allegations in the SEC’s complaint give rise to a securities violation, and we are confident that the complete record will show that Medallion Financial Corp. and Andrew Murstein have complied with the law.”

In its 2020 annual report, Medallion said it was moving away from the taxi business to focus on consumer lending. In addition to financing cabin medallions, the company says it offers loans for home improvements, commercial enterprises and the purchase of recreational vehicles.