SEC Charges Taxi Lending Giant Medallion Financial For Alleged Fraud

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The United States Securities and Exchange Commission (SEC) filed a complaint Wednesday against taxicab medallion lender Medallion Financial Corp and its Chief Operating Officer, Andrew Murstein.

Medallion Financial and Murstein, the company’s COO and President, had engaged in a fraudulent scheme intended to raise the company’s falling stock prices between 2014 and 2017, the SEC alleged in a complaint filed Wednesday in a Manhattan federal district court. The federal agency tasked with preventing market manipulation announced the move in a Wednesday press release.

To achieve that end, Murstein and Medallion had tried to manipulate media coverage of the business by paying a publicity firm to put out favorable articles on popular websites, the SEC alleged. (RELATED: Republicans Are Backing A Bill To Democratize Investing, But The SEC Has Other Plans)

Murstein is a former co-owner of the Richard Petty Motorsports NASCAR team.

Medallion’s stock prices had been declining because the rise and growing popularity of ride-hailing apps such as Uber and Lyft threatened the company’s principal business — lending money to those wanting to buy taxi medallions, the SEC said.

Taxi medallions are transferable taxicab operating permits cities like New York, Boston, Chicago, Philadelphia and San Francisco issue to constrain the supply of taxis in the market. Issuing cities usually raised the number of medallions at a rate slower than the rise in demand for cabs. This allows permits to be valuable investment assets.

Seeking to boost stock prices, Medallion and Murstein paid California-based media strategy firm Ichabod’s Cranium “to place positive stories about the company on various websites, including Huffington Post, Seeking Alpha, and,” the SEC alleged.

“Murstein allegedly paid for more than 50 articles and hundreds of positive comments, which were really paid advertisements placed across the web in an effort to deceive investors about the value of Medallion’s stock,” SEC New York Regional Office Director Richard Best said, according to the press release. “Companies also cannot shop for higher valuations when there is no evidence to support them.”

Ichabod’s Cranium owner Lawrence Meyers, also charged by the SEC, made up false identities to put out opinion pieces favoring Medallion, the complaint alleges. He did so, with Murstein’s knowledge, so that prospective investors who would come across the articles would perceive them to be credible, according to the SEC’s complaint.

Medallion, however, contended the SEC’s allegation that the publicity campaign was to drive up the prices. 

“The actions in question occurred five or more years ago at a time when short sellers were engaged in an online campaign to drive down the Company’s stock price for their personal profit by spreading misleading and disparaging information and misrepresenting its business,” Medallion told the Daily Caller in an email statement.

“Medallion sought only to provide the market with an accurate understanding of the Company’s financial position and prospects and an appropriate and transparent valuation of Medallion Bank and its other assets,” the company said.

The SEC also alleged that “Medallion and Murstein fraudulently increased the carrying value of Medallion Bank (the Bank), a wholly owned subsidiary of Medallion, to offset losses relating to the taxicab medallion loans.” When a valuation firm refused to inflate the Bank’s valuation, resisting pressure from Murstein, he fired and replaced the company with another one that complied with his demands, the SEC complaint stated. 

Andrew Murstein

Andrew Murstein from Medallion Financial Corp (Screenshot/Proactive via YouTube)

Murstein and Medallion are charged with offenses against the “books and records, internal controls, and anti-touting” provisions of the federal securities laws, according to the SEC. The SEC also accused Murstein of lying to Medallion’s auditor. Ichabod’s Cranium and Meyers face charges for touting and fraud.

“The SEC seeks permanent injunctions, disgorgement plus prejudgment interest, and civil penalties. In addition, the SEC seeks an officer-and-director bar against Murstein,” the SEC said in the press release.

“We intend to vigorously defend against the SEC’s unfounded charges and are confident we will be completely vindicated,” Medallion told the Daily Caller. “None of the allegations in the SEC complaint gives rise to a securities violation, and we are confident that the full record will show that Medallion Financial Corp. and Andrew Murstein complied with the law.”

“The SEC’s attempt to mischaracterize Medallion’s good-faith efforts defies logic when the SEC does not even allege that the Company’s actions had any market impact whatsoever and Mr. Murstein has never sold a single share of Medallion stock,” the company said.