("=UPDATE: Broker Used Fake News Releases To Affect Stocks - SEC," at 4:19 p.m. EDT Thursday, and "NY Broker Used Fake News Releases To Manipulate Stock - SEC" at 3:58 p.m. EDT Thursday, misidentified in the sixth paragraph the federal agency involved in approving the drug. The correct version follows:)
By Suzanne Barlyn
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- The Securities and Exchange Commission charged a securities broker with securities fraud on Thursday for allegedly creating and distributing fake news releases to manipulate stock prices of certain publicly traded companies.
Lambros Ballas of Merrick, N.Y., a broker with Global Arena Capital Corp. in New York, allegedly announced good news regarding multiple companies, including Walt Disney Co. (DIS) and Google Inc. (GOOG), according to the SEC.
He allegedly wrote a phony press release the evening of Sept. 29, announcing that Discovery Laboratories Inc. (DSCO) of Warrington, Pa., had obtained approval from the U.S. Food and Drug Administration for Surfaxin, a drug the company is developing to prevent respiratory distress in premature babies, according to a civil complaint filed in federal court in California.
The SEC alleges that Ballas then posted a message on a stock message board with a link to what he described as the company's "official press release."
Discovery Laboratories shares opened significantly higher on the morning of Sept. 30, the SEC said.
The company, however, issued a legitimate press release that morning, announcing that it had a teleconference with the FDA and believed that a path for drug approval had been established. But the legitimate Discovery Laboratories announcement didn't say the FDA had approved the drug.
Ballas also allegedly created and issued press release falsely claiming that IMAX Corp. (IMAX) had been acquired by Disney, according to the complaint. He then posted the fabricated news on Internet message boards, according to the complaint. The price of IMAX shares increased following the phony news, the SEC said.
IMAX later denied, in a news release, that it had been acquired.
Microsoft Corp. (MSFT), Google, and Local.com Corp. (LOCM), a search-engine company, were also subjects of purported news releases that Ballas allegedly fabricated, according to the SEC.
Ballas isn't currently represented by counsel, SEC attorneys said. Efforts to reach Ballas were unsuccessful.
Brian Hagerman, president and chief compliance officer of Global Arena Capital Corp., said the firm is cooperating with regulatory authorities and will continue to do so. He declined further comment.
-By Suzanne Barlyn, Dow Jones Newswires; 212-416-2230; suzanne.barlyn@dowjones.com